The global steel industry, including Chinese producers, have opposed the consolidation deal between two of the world's largest miners, BHP Billiton Ltd and Rio Tinto, on the grounds that it could lead to a monopoly control of key iron ore assets.
The two Australia-based companies last Friday agreed to set up an iron ore joint venture after Rio Tinto scrapped Aluminum Corp of China's (Chinalco's) plan for a $19.5 billion investment in the former.
The proposed joint venture would control most of Australia's iron ore resources. The deal will see just two suppliers -- the Australian joint venture and Brazil's Vale -- controlling 70 percent of global iron ore trade, industry warned.
The Secretary-General of the China Iron and Steel Association, Shan Shanghua, was quoted by Caijing magazine as saying that if these large iron ore mines in Australia were concentrated in the hands of one company, then it may lead to a monopoly situation.
"China needs to import almost half of the iron ore it consumes, and the volumes from BHP Billiton and Rio Tinto account for more than half of these imports," he said.
The World Steel Association Director-General Ian Christmas said: "The announcement of this possible joint venture does nothing to allay the far greater competition issues that we were and are still concerned about. At present, we cannot see how this JV could be in the public interest and thus it should not be allowed to proceed."
The association represents 180 steel producers and regional steel industry groupings.
It also called on competition authorities to seriously examine the obvious implications of the deal for future pricing regimes and the competitive environment for iron ore.
"Even the largest steel company in the world today accounts for less than 15 percent of the total world steel production. We stand ready to provide access to our data to help competition authorities review the impact of this new joint venture proposal," Christmas said.
Jia Liangqun, an industry expert with Mysteel.com, said the deal will be able to strengthen their say in iron ore pricing and further squeeze the space for bargains for China's steel industry. Iron ore prices may likely increase after this deal.