Rio, the world's second largest iron ore producer, and BHP, the third largest, said they would keep their marketing separate to try to ease regulatory concerns when they unveiled the agreement to combine their Western Australian iron ore operations.
The European Commission said it would investigate whether the planned joint venture breached EU antitrust rules which prohibit companies from fixing prices and sharing markets and that the case would be a priority.
"The proposed joint venture between Rio Tinto and BHP Billiton would combine the parties' iron ore assets in Western Australia," the Commission said in a written statement.
"The Commission will in particular examine the effects of the proposed joint venture on the worldwide market for iron ore transported by sea (so-called 'seaborne iron ore')."
It said worldwide consumption of iron ore was picking up after a slowdown due to the economic and financial crisis, and was forecast to grow steadily in the coming years.
The World Steel Association and European steelmakers' lobbying group Eurofer have criticised the proposed joint venture. "We remain convinced that the joint venture would be an unacceptable concentration which will significantly restrict competition in the seaborne iron ore market," said Gordon Moffat, Eurofer director-general.
"It effectively creates a duopoly with the iron ore market for the entire world in the hands of just two companies," Eurofer added.
German industry has also recently warned about the increasing concentration of global commodities supplies, citing the proposed Rio Tinto and BHP Billiton joint venture (EurActiv 26/08/09).
Investors have said securing regulatory approval could be the main stumbling block to the proposed joint venture.
BHP, which failed in a bid to take over Rio in 2008 after objections from the European Commission, and Rio have said they also plan to seek approval for the joint venture from the Australian Competition and Consumer Commission, and hope to close the deal in the second half of this year.
The companies have forecast annual savings of at least $10 billion in capital and operational costs from the joint venture.
(EurActiv with Reuters.)
