Mining tycoon Rio Tinto decided last Friday against a US$19.5 million deal with Chinalco, in favor of a new iron ore agreement with BHP Billiton.

According to the agreement, Rio Tinto and BHP Billiton will form a joint venture to share haulage resources and iron ore mines in Pilbara region of western Australia.

The new alliance between the world's No. 2 and No. 3 iron ore supplier has caused monopoly concerns among Chinese industry analysts.

Iron ore output in Western Australia, by Rio Tinto and BHP Billiton, reached 150 million tons and 110 million tons respectively last year and their joint venture, if approved, will have an annual output capacity of 270 million tons. This will almost match the annual 340 million tons annual output by the world's largest iron ore supplier: Brazil's Vale SA.

The new alliance will change the global iron ore supplying landscape by narrowing the current three biggest rivaling suppliers (Vale SA, Rio Tinto and BHP Billiton) into two, posing a bigger threat of monopoly, according to Chinese analysts.

The new joint venture should give the two iron ore suppliers an edge in price negotiations. Experts suggest, China, as the largest iron ore importer, start anti-monopoly investigations into the case, to prevent potential harm to Chinese steel companies.

Shan Shanghua, general secretary of China Iron and Steel Association, expressed earlier strong opposition to the Rio-BHP deal, deeming it a new monopoly in the global iron ore market.

According to China's Anti-Monopoly Law, ventures outside China will also be subject to anti-monopoly measures if they eliminate or have restrictive effect on competition on the domestic market.

According to experts, the combined business turnover of Rio Tinto and BHP Billiton has qualified the deal for anti-monopoly investigations.

For more details, please read the full Chinese story here:

http://paper.cnstock.com/html/2009-06/08/content_70952803.htm

(China.org.cn June 8, 2009)