EU steelmakers unhappy with EU conditions on Glenstrata deal

LONDON Fri Nov 23, 2012 12:44am IST

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LONDON (Reuters) - EU steelmakers said Europe's antitrust conditions for Glencore (GLEN.L) to go ahead with its $33 billion takeover of Xstrata XTA.L are not sufficient to prevent the dominant influence of one zinc supplier.

The European Commission (EC) cleared the world's largest diversified commodities trader to complete the $33 billion deal but said it must scrap an exclusive European zinc sales agreement with producer Nyrstar NYR.BR..

Zinc, used in metal alloys and to prevent corrosion, is a metal where Glencore and Xstrata would be particularly strong as a combined entity.

Terminating the agreement between Glencore and Nyrstar addresses one of the European steel industry's major concerns, but the remedy may not be sufficient, steel industry body Eurofer said on Thursday.

"The European steel industry, which uses the lion's share of zinc metal traded in Europe, will still have to face a leading provider effectively controlling the zinc supply chain from mining to warehousing operations," Eurofer said in a statement.

Post-merger, the parties will still have a share of around 35 per cent of the European zinc market and the vertical integration of the new entity, which includes mining, smelting, trading, logistics and warehousing, is also concerning according to Eurofer.

"This shows that Glencore/Xstrata can still exert controlling influence on the zinc market, for instance by artificially shortening supplies," Gordon Moffat, Eurofer director general, said.

The European steel industry needs zinc for corrosion-resistant coatings applied to steel products. More than half of global zinc production goes into steel making.

(Reporting by Silvia Antonioli; Editing by David Holmes)