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Australia competition body won't block Rio-Chinalco

(Agencies)
Updated: 2009-03-25 15:20

Australia's competition watchdog cleared Rio Tinto Ltd's $19.5 billion tie-up with China's State-owned Chinalco, rejecting at least one key argument being considered by the deal's final arbiter.

Related readings:  Decision on Chinalco and Rio's deal to be delayed for 90 days  Chinese firms face hurdles in Australia  No changes to Rio Tinto deal: new Chinalco chief

The deal still needs approval from the Australian treasurer, based on the national interest, after he receives a recommendation from the government's Foreign Investment Review Board. The board has extended its probe by 90 days to late June.

The Australian Competition and Consumer Commission (ACCC) said it had considered whether Rio might end up working alongside China's steelmakers, on the assumption that Chinalco and Chinese steel mills are subsidiaries of the same parent, the government, and therefore might share commercial interests.

It said it studied whether that could give Chinalco the ability to make Rio Tinto lower iron ore prices below competitive levels to aid Chinese steel makers.

"The ACCC concluded that Chinalco and Rio Tinto would be unlikely to have the ability to unilaterally decrease global iron ore prices below competitive levels," the commission said.

It also said there was little direct overlap in Rio Tinto's and Chinalco's bauxite, alumina and copper operations in Australia, so the tie-up would not harm competition.

ABN AMRO analyst Warren Edney said there were no competition issues for the Commission to consider.

"Chinalco does not have any iron ore, and aluminum is traded on the London Metal Exchange. In other words that's a free market," said Edney.