EC probes copper market (May 14, 2003)

Vancouver — European Union antitrust investigators, in co-operation with Canadian and U.S. competition authorities, have contacted mining giants BHP Billiton (BHP-N), Rio Tinto (RTP-N) and Freeport-McMoRan Copper & Gold (FCX-N) about a possible cartel on copper concentrates.

The European Commission raided the London offices of BHP and Rio Tinto, as well as Portugal’s Somincor (minority-owned by Rio Tinto), while New Orleans-based Freeport received a grand jury subpoena to provide documents in connection with an antitrust investigation of the copper concentrate industry.

“The purpose of these inspections is to ascertain whether there is evidence of a cartel agreement and related illegal practices concerning the fixing of sales prices and sales conditions, customer allocation and market sharing for this product,” the commission said in a statement.

BHP confirmed that the competition directorate-general had served notice to the company to submit to an investigation in the copper concentrate market. The major says it “understands that this is an industry-wide investigation and currently has no reason to believe that it is the focus of their investigation.”

BHP controls a 35% share of the custom traded copper concentrate market. Over the past year, BHP Billiton produced 608,000 tonnes of copper contained in concentrate from its worldwide operations.

The move by the regulators is believed to have been prompted by complaints from custom smelters in Europe that are struggling to deal with the consequences of a shortage of concentrate; as a result of the shortage, they have faced a dive in the fees paid by producers to process copper raw material. The major copper producers have been forced to lower output over the past two years, as weak demand for copper drove the metal price down to historic lows.

Somincor, which is 51% state-owned, responded to the probe by stating: “It is our understanding that the situation will be clarified shortly and the conclusion will clear Somincor of any potential less-than-correct practice regarding competition, which, moreover, it has never had.”

European antitrust officials are also taking aim at Finland’s Outokumpu Oyj and units of Italy’s Generale Industrie Metallurgiche for allegedly fixing the prices of copper pipes in Europe.

The investigations are in the preliminary stage, and no deadline for finishing the probe was given.

The markets initial reaction to the news of a possible copper concentrate market cartel was muted. Refined copper had led metals higher over the past week, gaining nearly US$60 at its peak on May 13 to US$1,684 a tonne, which was the metal’s strongest price since late March.