China, Europe steelmakers join anti-Rio/BHP chorus

By Yuko Inoue and Ben Blanchard

TOKYO/BEIJING (Reuters) - Japanese, Chinese and European steelmakers joined forces to fight a plan by Rio Tinto (RIO.L: Quote, Profile, Research) and BHP Billiton (BLT.L: Quote, Profile, Research) to link up iron ore operations, while China called for "a fully open international market."

Steelmakers believe a tie-up between the second- and third-largest producers of the raw material to make steel would further concentrate the industry, which saw prices quadruple from 2004 to 2008.

"A merger of iron ore assets of this type in a world market already dominated by just three suppliers would not be in the interests of the steel industry, European consumers or the European economy," industry body Eurofer said on Tuesday.

Debt-ridden Rio (RIO.AX: Quote, Profile, Research) ripped up its $19.5 billion deal with China state-owned metals conglomerate Chinalco last week, opting instead to combine its western Australian iron ore operations with those of BHP (BHP.AX: Quote, Profile, Research) in a 50:50 joint venture.

The two mining heavyweights, which with Brazil's Vale (VALE.N: Quote, Profile, Research) (VALE5.SA: Quote, Profile, Research) account for nearly 70 percent of the world's traded iron ore, face tough anti-trust scrutiny, but analysts say the planned venture's shrewd structure could mean they sidestep some concerns.

Rio and BHP are betting that keeping their iron ore marketing operations separate will ease anti-trust concerns.

"What was very smart of Rio and BHP is that they've done it as a joint venture to use their infrastructure and that only marginally increases the tonnes for BHP," said James Wilson, a mining analyst for DJ Carmichael & Co in Perth.

"BHP goes from 150 to 170 million tonnes and Rio actually reduces from about 200 million to 170 million tonnes. Is this really anti-competition? I don't think so, and doubt the European Commission will think so," he said.