China likely to probe mining giants' monopoly
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Australian iron ore vendor Rio Tinto announced last Friday that it was working with its clients on a quarterly pricing plan. This coincided with Vale and BHP Billiton's previous decision on April 1 to abandon a long-term pricing plan and start a quarterly one.
In the midst of iron ore talks, the three mining giants have assumed an uncommon universal attitude to a supply, transportation and pricing plan, all hinting at the formation of a monopoly.
A law expert said that in addition to clearing up the domestic iron ore market, the Chinese government is now preparing to launch an anti-monopoly investigation.
There are two ways to launch an anti-monopoly investigation in China toward a foreign enterprise: one is that the victim company in China appeals to the government; the other is that the government independently launches an investigation, on the premises that the foreign company's act violates market economy regulations.
"The Anti-monopoly Law of China clearly stipulates that it applies to the situation in which a foreign company's act violates the domestic market competition," said the expert.
Steel makers in China, under their supervisory body China Iron and Steel Association (CISA), have protested to the three mining companies' monopolizing act. "The iron ore price is now the three mining companies' call, not the market's," a state-owned steel company's official complained. The official also stated that despite having the largest demand, the Chinese steel industry has never had a voice in recent years' iron ore talks.
An insider from the CISA mentioned that the three mining companies are bullying the rest of the Chinese steel industry in the talks. "If they keep cornering us, we will have to resort to legal means to protect our legitimate rights," said Xu Xiangchun, an executive of MySteel.net.
With more than 70 percent of the iron ore market share and some presence in the international maritime shipping market, the three iron ore giants have always dominated the iron ore talks. Not only do they raise the price each year, but they also attempt to abolish the long-term pricing plan.
The mining ore coalition has triggered a wave of protests in Europe. Not long ago, the European Confederation of Iron and Steel Industries (Eurofer) appealed to the European Commission, demanding an investigation as to whether or not the three iron ore suppliers are involved in a monopoly.
EU data shows that even in the midst of the financial crisis last year, the three giants insisted on a 50 percent post-tax profit.
"Presently, the iron ore price is way beyond the normal and reasonable level," said the law expert.
"What's certain is that their acts have infuriated the entire world's steel business. If they insist on a monopolized price, they will face a worldwide boycott, and an anti-monopoly investigation from more bodies," the person said.
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