Appeal to the European authorities by the European steel industry and its customers to tackle competition distortion and excessive pricing in iron ore

Date

31 Mar 2010

Sections

Climate & Environment
Sustainable Dev.

Fair access to raw materials at competitive market conditions is crucial for the sustainable development of manufacturing industry and the sound recovery of the global economy from the deepest financial and economic crisis in more than 60 years. Iron ore is the basis for the EU’s most important value chain. If economic access to it is hampered through unjustifiable pricing and consequently steel production in Europe is jeopardized, this would have severe consequences for the whole value chain and millions of jobs in the sectors concerned.

 

EUROFER and ORGALIME condemn the attempts of the iron ore companies to increase iron ore prices by 80% or more, considering that:

-          the high degree of market concentration in the seaborne iron ore market, with just three companies controlling almost three quarters of the world market, already has resulted in a significant pricing power,

-         the proposal by BHP and Rio Tinto to merge their Australian iron ore assets into a JV will further intensify concentration in the sector with iron ore supply being dominated by only two companies,

-         iron ore miners have profited from huge increases in prices in recent years and have already profit margins of up to 50 % per tonne of iron ore,

-         the current proposals of further massive price increases are not based on any demand fundamentals and would simply represent a huge transfer of wealth,

-         these price proposals come at a time when manufacturing industry is still reeling from the effects of the financial and economic crisis and are unjustifiable,

-         such price increases will inevitably have a significant impact on prices through the whole value chain down to the end consumer; they will place in jeopardy the rather fragile recovery of manufacturing industry and the economy of the European Union as a whole.

EUROFER and ORGALIME urge

1.      fair conditions on prices and respect for current contract conditions,

2.      an immediate intervention by European governments and authorities to tackle competition distortions in raw material markets and to prevent speculation on raw materials in order to support the long term future of the industrial value chain in Europe,

3.      the European Commission and German federal cartel office as competent competition regulators to continue examining thoroughly the proposal by BHP Billiton and Rio Tinto to create a joint venture.

 

EUROFER – the European Confederation of Iron and Steel Industries – represents the interests of 60 steel companies and national steel federations from 23 EU Member States which are combining almost 100% of EU steel production.

ORGALIME – The European Engineering Industries Association –  speaks for 33 trade federations representing some 130,000 companies in the mechanical, electrical, electronic and metalworking industries of 22 European countries. The industry employs some 11 million people in the EU and in 2008 accounted for some €1,885 billion of annual output. The industry not only represents more than one quarter of the output of manufactured products but also a third of the manufactured exports of the European Union.

 

Contacts :

EUROFER : Gordon Moffat, tel. +32 2 738 79 26, G.Moffat@eurofer.be

Orgalime : Adrian Harris, tel. +32 2 706 82 40, Adrian.harris@orgalime.org