European industry bodies urged European Union regulators on Wednesday to prevent unfair competition and excessive pricing of iron ore, saying it could hamper economic recovery in Europe.
Steel industry body Eurofer and European auto manufacturers association ACEA said they were concerned by increases in the price of iron ore following an announcement by top global producers Vale and BHP Billiton of changes in their pricing models.
Italy's Mechanical Industries Federation ANIMA joined in the Eurofer calls for strong common action to oppose what it called unjustified increases in commodities prices and urged Rome to support the local steel industry -- the second biggest in Europe -- by cutting taxes on investments and lowering power prices.
Eurofer said in a letter to EU antitrust authorities that control of almost three quarters of the world market by three companies had resulted in unbalanced pricing power and a high degree of market concentration.
The European Commission said it was not planning a new investigation following the complaint from Eurofer, but said the content of the letter would be useful in its on-going probe into a planned iron ore joint-venture between BHP and Rio Tinto.
The letter is not a formal complaint, but the Commission will look at all relevant information to examine competition issues in the sector, an official of the EU's antitrust watchdog said.
Eurofer issued its appeal one day after top global iron ore producer Vale and BHP Billiton, the world's No. 3 producer, said they would price iron ore to Japanese steelmakers quarterly from April 1, signaling the demise of annual fixed-price deals.
Iron ore is the basis for the EU's most important value chain, Eurofer said in a joint statement with Orgalime, the European Engineering Industries Association.
If economic access to it is hampered through unjustifiable pricing and consequently steel production in Europe is jeopardized, this will have severe consequences for the whole value chain and millions of jobs in the sectors concerned.
A SECTOR ENQUIRY PERHAPS?
Antitrust experts said the European Commission, which has shown no hesitation in tackling big companies and national governments in enforcing EU competition rules in the past, would need to weigh several issues before deciding whether to launch an enquiry into the sector.
The Commission has to consider the interests of European buyers but also those of the governments of Australia, Brazil, South Africa and even China. There is a lot it has to take into account, said antitrust lawyer David Wood at Gibson, Dunn & Crutcher.
Wood said wider enquiry into the sector would only be useful either if there were lots of players that needed to be consulted or if it was difficult to get complainants to come forward for fear of retaliation.
If Eurofer can show that complainants are unlikely to come forward unless there is a sector enquiry, the Commission might well launch one, he added.
The commission has in recent years conducted inquiries into the financial services industry, pharmaceuticals and energy.
The energy sector inquiry is one of the Commission's biggest successes as it led to individual cases and forced companies such as E.ON, RWE and ENI to open up their markets to rivals.
We could say that the Commission has in some ways already started an inquiry into the iron ore sector. We understand that questionnaires were recently sent to interested parties in the investigation of the contemplated JV between BHP and Rio Tinto, said an antitrust lawyer who declined to be named.
However, today Eurofer officially asked the Commission to focus its investigation in the sector also on the iron ore suppliers' pricing conduct. This development will likely increase pressure on BHP and Rio Tinto, he said.
Eurofer said a proposal by BHP and Rio Tinto to merge their Australian iron ore assets into a joint venture would intensify concentration in the sector, with iron ore supply being dominated by only two companies.
BHP declined to comment on Eurofer complaint.
(Additional reporting by Foo Yun Chee, Eric Onstad in London; Svetlana Kovalyova in Milan and Brian Ellsworth in Rio de Janeiro; editing by Timothy Heritage and James Jukwey)