Brussels, 31/10/2001 (Agence Europe) - On Tuesday, the European Commission have the go-ahead to the proposed acquisition of Brazilian iron ore mining company Caemi Mineraçao e Metalurgia SA (Caemi) by Companhia Vale do Rio Doce (CVRD), another Brazilian iron ore producer, and Japanese trading company Mitsui & Co. Ltd (Mitsui) as long as the parties respect their undertaking to dispose of Caemi's 50% stake in Quebec Cartier Mining Company (QCM), a Canadian iron ore producer.
The competitive impact of the merger was assessed in relation to the supply of "seaborne" iron ore, as West European steel producers (due to the absence of local supplies) depend almost exclusively on iron ore imported from mines located a long way from Europe. Iron ore transported by ship represents about 45% of all traded iron ore, and the main sources of seaborne supply are located in Brazil and Australia.
The Commission's investigation showed that the proposed transaction would lead to the creation, if not the strengthening, of a dominant position in the seaborne supply of iron ore pellets. The new entity would hold a particularly high share of this market in the wake of the merger. The investigation also revealed that the remaining competitors, principally Rio Tinto and BHP, as well as the smaller Swedish Company LKAB, would be unlikely to be able to effectively constrain Mitsui/CVRD/Caemi's market behaviour. For similar reasons, the Commission concluded that the operation would also lead to the creation or strengthening of a dominant position in the seaborne market for direct reduction iron ore. The Commission did, however, decide to authorise the merger as long as the parties respect the commitments put forward on 5 October 2001 to divest themselves of Caemi's 50% stake in QCM, thereby eliminating the overlap between CVRD's and Caemi's production of iron ore pellets.