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First stab at acquisition by Australia's South32 hits competition hurdle
February 23, 2017 / 12:51 AM / 10 months ago

First stab at acquisition by Australia's South32 hits competition hurdle

SYDNEY (Reuters) - The first attempt at an acquisition by Australia’s South32 following its spinoff from BHP Billiton has raised competition concerns over control of the local coking coal market.

A sign adorns the building where Australian miner South32 has their office in Perth, Western Australia, November 19, 2015. REUTERS/David Gray/File Photo

Australia’s chief competition regulator on Thursday said it was concerned South32’s proposed $200 million acquisition of Peabody Energy’s Metropolitan colliery in Australia could curb competition in the supply of coking coal in the domestic market.

The acquisition would also include a 16.67 percent stake in a nearby coal terminal.

BlueScope Steel, Australia’s biggest steel producer, told Reuters it had made confidential submissions to the Australian Competition and Consumer Commission (ACCC) voicing concerns South32’s purchase could lead to higher coal prices.

“As a direct result of South32’s proposed acquisition of the Metropolitan Colliery, BlueScope is concerned about the lessening of competition which would likely have the effect of increasing coal prices for the majority of our coking coal requirements,” BlueScope said in an email sent to Reuters.

South32 would become the only large supplier of coking coal to the eastern Illawarra steelmaking hub, the ACCC said in a preliminary statement on Thursday.

Steel producers are facing some of the highest raw materials costs in years as prices for coking coal of around $150 a ton remain well above last year’s levels and iron ore trades at a 30-month high of almost $100 a ton.

South32 announced the deal with Peabody on Nov. 3, saying the mine would work well with its existing operations.

In a statement emailed to Reuters, South32 said it would continue to engage with the ACCC and that it expected a final decision from the regulator on April 6.

South32 is a collection of smaller assets spun off from mining giant BHP in 2015. Until recently it was openly pursuing the remaining 40 percent of a manganese mining and smelting business located in Australia and South Africa it jointly owns with Anglo American.

South32 Chief Executive Graham Kerr this month said that his company was still interested in Anglo American’s stake at the right price, but that the transaction was not seen as a necessity.

Reporting by James Regan; Editing by Joseph Radford

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