BHP-Rio Backs off from Joint Marketing Plan

Submitted by Jim Thesiger on 16 October, 2009 - 06:26

The two iron ore export giants- BHP Billiton (BHP) and Rio Tinto (RIO) has finally dropped their plan of jointly marketing up to 15 percent of iron ores from the Pilbara operation. In an attempt to calm down the customers and regulators, the two companies announced to separately market their iron ores but left about 10 to 15 percent of the production to be marketed through a joint company.

The idea of joint marketing ignited confusion and concerns in the global market with many market analysts pointing their fingers to the proposal. The Rio-BHP joint venture was arranged hastily while Jan du Plessis, the newly appointed chairman if Rio was moving forward with a plan to ditch the $US19.5 billion Chinalco rescue package. The decision came in June 5th, the same day when Chinalco announced its deal of increasing stake in Rio and buying into its top projects had been put down in favour of a $US15.2bn rights issue. It is to be mentioned that Chinalco came up with its original 9 percent stake in Rio in an attempt to hinder the failed $135 billion BHP bid over Rio.

While finalising the join venture deal, Rio and BHP came up with the decision of backing off from the join marketing plan as the proposal was not taken positively by many influential figures. A BHP spokeswoman stated that the decision of ditching the plan of join marketing made by the two companies will help people to understand the core concept of this join venture. Under the new scenario, Rio Tinto and BHP Billiton will market 50 percent each of the iron ore they generate individually. Currently the combined yearly iron ore production of Rio and BHP is about 250 million tonnes which is almost one third of the seaborne demand of the world which is expected to hit 400 million tonnes in 2011.