Brussels, 03/07/2001 (Agence Europe) - The European Commission has decided to launch an in-depth investigation into the planned takeover of Brazilian-based mining company Caemi by CVRD, another Brazilian mining firm, and Japanese trading company Mitsui. The Commission believes there the merger poses serious competition concerns which could have an adverse effect on EU steel producers.
Under the terms of the proposed operation, Companhia Vale do Rio Doce (CVRD) and Mitsui & Co Ltd (Mitsui) will acquire joint control of Caemi Mineraçäo et Metalurgia SA (Caemi). The detail was notified for clearance on 18 June 2001 in the European Economic Area. The Commission's initial review suggested that the merger would have an impact on competition in the worldwide supply of seaborne iron ore, and particularly on the supply of iron ore to Western Europe and East Asia. Iron ore transported by ship represents about 45% of all iron ore traded and participation in seaborne trade requires efficient infrastructure such as dedicated railway and deep water harbours. The Mitsui/CVRD/Caemi joint venture would create the world's biggest producer of seaborne iron ore. The company would also command a particularly high share of the market for pellets (on of the three forms in which iron ore is sold), a market in which CVRD already holds a very strong position. The Commission's in-depth investigation will seek to ascertain whether this further concentration is likely to result in competition concerns. The transaction would also reduce the number of major players in the seaborne iron ore sector from four to three: CVRD/Mitsui/Caemi and Australia's Rio Tinto and Broken Hill Proprietary Company Ltd. Together, the three would hold very high market shares in all segments of the seaborne ion ore market. The Commission's in-depth investigation will seek to ascertain whether the three main players would still be in a position to compete effectively against one another should the transaction go ahead. The Commission will also examine to what extent the European steel industry would be in a position to exert significant countervailing purchaser power in a post-merger scenario.
According to the EU's merger regulation, the Commission now has four months to conduct its investigations before reaching a final decision and may decide to invite the merger parties and other interested parties to give evidence.