Japanese Steelmakers Voice Concerns Over BHP's Potential Anglo American Takeover

Japanese steelmakers express concerns over BHP's potential takeover of Anglo American, citing market dominance in global coking coal supply. The combined entity would control 13% of the seaborne market, sparking worries over price formation and supply stability.

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Nitish Verma
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Japanese Steelmakers Voice Concerns Over BHP's Potential Anglo American Takeover

Japanese Steelmakers Voice Concerns Over BHP's Potential Anglo American Takeover

Japanese steelmakers have raised concerns with Australian authorities over BHP Group's potential takeover of Anglo American, citing the potential for market dominance in the global coking coal supply. The combined entity would control 13% of the seaborne market, with 44 million tonnes of coking coal production, primarily in Queensland's Bowen Basin where BHP and Anglo American are the two biggest producers.

Why this matters: The potential takeover could have far-reaching implications for the global steel industry, as Japan is heavily reliant on Australian coking coal imports. Any disruption to the supply chain or price increases could impact steel production and ultimately affect the construction and manufacturing sectors.

Australia is the world's biggest exporter of coking coal, accounting for about 60% of Japan's imports. Japanese steelmakers, including JFE Steel and Kobe Steel, worry that BHP's increased market power could impact price formation and supply stability. "BHP already has a large share of the supply of high-quality hard coking coal in the seaborne trade, and we will take measures to ensure that further oligopolisation will not impede sound price formation and stable supply," a JFE Steel spokesperson stated.

Another Japanese steelmaker source expressed their general opposition to the potential merger, saying, "In general, we are against the BHP-Anglo union as it would create a supplier with a huge market share, especially in the hard coking coal market." The concerns have reached the Queensland government, with Deputy Premier and Treasurer Cameron Dick acknowledging, "We work closely with our Japanese customers and are aware of their concerns." Dick emphasized that BHP needs to ensure its coal remains competitive or risk losing state government support.

BHP's production has fallen in recent years after selling some mines, but the company has stressed its desire to expand in high-quality coking coal. Japan's Fair Trade Commission has the authority to investigate a BHP-Anglo American transaction and could block a deal if it were found to harm Japanese companies. The Queensland government's recent increase in coal royalties without industry consultation has also led to concerns about investment in mines and coking coal supply.

The Japanese steelmakers' concerns highlight the potential implications of BHP's takeover on the global coking coal market and the need for Australian authorities to carefully consider the deal's impact on competition and market dynamics. With Australia being a major supplier to Japan, the outcome of this potential merger could have significant consequences for the steel industry in both countries.

Key Takeaways

  • Japanese steelmakers oppose BHP's potential takeover of Anglo American, citing market dominance concerns.
  • The combined entity would control 13% of the global seaborne coking coal market.
  • Australia is the world's largest exporter of coking coal, accounting for 60% of Japan's imports.
  • Japanese steelmakers fear BHP's increased market power could impact price formation and supply stability.
  • The deal's outcome could have significant consequences for the steel industry in both Australia and Japan.