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Japanese Steelmakers Alarmed by Potential BHP-Anglo American Merger

Proposed Takeover Could Create Coking Coal Monopoly, Threaten Stable Supply

by Victor Adetimilehin

Japanese steelmakers are voicing concerns over a potential merger between mining giants BHP and Anglo American. The proposed deal could create a dominant player in the coking coal market, a key ingredient for steel production. Australia is the world’s largest exporter of coking coal, and Japan relies heavily on Australian supplies, with around 60% of its imports coming from Queensland. BHP and Anglo American are the two largest coking coal producers in the state.

Concerns Over Market Power and Pricing

A combined BHP-Anglo American would control a significant share of the global coking coal market, raising concerns about potential price hikes and supply disruptions. JFE Steel, a major Japanese steel producer, expressed its disapproval of the deal, highlighting anxieties about “further oligopolization” and its impact on stable pricing and supply.

Representatives from Japanese steel companies have already met with Queensland government officials to discuss their worries. The merger would concentrate a large portion of the world’s top-quality coking coal mines in the hands of a single entity, BHP.

Japan’s Fair Trade Commission has the authority to investigate the deal and potentially block it if deemed harmful to Japanese companies. The commission could ask BHP to divest some of its coal assets as a remedy to maintain competition.

Queensland Government Seeks Assurances

The Queensland government, which collects royalties on coal production, is also wary of the merger’s potential impact. BHP has previously stated it would not invest in expanding production in the state due to a recent hike in coal royalties. Queensland Deputy Premier Cameron Dick emphasized the importance of BHP maintaining competitive coal prices to retain the state’s support.

Japan faces growing competition from India for high-quality coking coal. BHP already supplies 40% of its coking coal to India and anticipates a doubling of India’s demand by the end of the decade. A BHP-Anglo-American merger could further limit Japan’s access to this crucial resource.

Potential Roadblocks to the Deal

The proposed merger faces hurdles beyond concerns from steelmakers. Japan could lobby antitrust authorities in other countries to block the deal, similar to its actions when BHP attempted to acquire iron ore rival Rio Tinto in 2007. Additionally, Queensland could withhold approvals for the transfer of mineral assets within the state, further complicating the deal.

Source: Mining.com


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