2004/270/EC: Commission Decision of 30 October 2001 declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement (Case COMP/M.2420 — Mitsui/CVRD/Caemi) (notified under document number C(2001) 3363) (Text with EEA relevance)

• Articles: 3

Article 1

The notified operation whereby Mitsui and CVRD acquire joint control over Caemi is hereby declared compatible with the common market and the functioning of the EEA Agreement, on condition that the commitment relative to the divestiture of Caemi's 50 % interest in QCM as set out in the Annex is fully complied with.

Article 2

This Decision is addressed to:

MITSUI & Co. Ltd 2-1 Ohtemachi 2-chome Chiyoda-ku Tokyo - 100-0004 (Japan)

Companhia Vale do Rio Doce (CVRD) Graça Aranha, 26 - 15th Floor 2005-900 Rio de Janeiro Brazil

Done at Brussels, 30 October 2001.

For the Commission

Mario Monti

Member of the Commission

(1) OJ L 395, 30.12.1989, p. 1 (corrected version in OJ L 257, 21.9.1990, p. 13).

(2) OJ L 180, 9.7.1997, p. 1.

(3) OJ C 79, 30.3.2004.

(4) OJ C 79, 30.3.2004.

(5) Parts of this text have been edited to ensure that confidential information is not disclosed; those parts are enclosed in square brackets and marked with an asterisk.

(6) The Economics of Iron Ore, fourth edition 2000 (Roskill).

(7) Ore sold directly from a mine without beneficiation is known as "run-of-mine" or direct shipping ore.

(8) This forecast increase in demand is likely to result in the construction of nearly 100 Mt per year of new capacity in the near future: see The Economics of Iron Ore, fourth edition 2000 (Roskill).

(9) It should be pointed out that the parties never questioned the capacity figures which they had provided until two weeks after the issuance of the statement of objections.

(10) Earnings before interest, taxes, depreciation and amortisation.

(11) All figures provided by the parties.

(12) All figures provided by the parties.

(13) All figures provided by the parties.

(14) All figures provided by the parties.

(15) All figures provided by the parties.

(16) All figures provided by the parties.

(17) All figures provided by the parties.

(18) All figures provided by the parties.

(19) All figures provided by the parties.

(20) The data contained in this section is based on information provided by the parties.

(21) There are many EAF facilities in the EU which use "scrap" iron (rather than DRI) as an input. EAF production using DRI consumes very large quantities of energy, usually gas.

(22) This plant has been temporarily shut down, principally on account of high gas prices, but is expected to be reopened in October 2001; Ispat expresses confidence that the plant is viable long-term, in the expectation of lower gas prices following liberalisation of energy markets in Europe.

(23) The Economics of Iron Ore, fourth edition 2000 (Roskill).

(24) In addition to the notified operation, CVRD has added substantially to its production capacity over the past year or so: it has acquired the Brazilian operators Ferteco, Socoimex, and Samitri, as well as a 50 % stake in Samarco.

(25) The Economics of Iron Ore, fourth edition (2000).

(26) In 2000, this trend was upset: the first price agreed was between the Mauritanian producer SNIM and the European steel company Usinor.

(27) Principally Tex Report and Metal Bulletin.

(28) Average price for seaborne sales into western Europe, according to parties' answer to questionnaire of 15 June, question 4; cif price is the most meaningful in this context (demand-side substitutability), as it reflects the horizon of the customers.

(29) Latin American Equity Conference.

(30) The parties dispute that conclusion, on the basis that the Commission did not sufficiently specify the "permanent" character of the price rise concerned. However, prices are established on an annual basis. It is therefore obvious that any price rise mentioned by the Commission would be for at least one year. As NERA indicated, "in general, the competitive assessment of mergers considers time periods of at least one year and in some instance up to two years. Considering the scope for switching over this time period is particularly appropriate in assessing competition in the iron ore industry, given that most competition in this industry takes place on an annual basis". Finally, the parties claim that switching can occur within a limited time period. It is therefore not easy to explain why customers would only react to a price increase in the long term, if, as the parties claim, they can switch between iron ore types within a few months.

(31) Average price for seaborne sales into western Europe, according to parties' answer to questionnaire of 15 June, question 4; cif price is the most meaningful in this context (demand-side substitutability), as it reflects the horizon of the customers.

(32) OJ C 372, 9.12.1997, p. 5.

(33) This method corresponds to the definition of "relevant geographic market" as described in paragraph 8 of the Notice: "The relevant geographic market comprises the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas".

(34) For instance, most new mines opened by Australian mining companies are for pisolitic iron ore, which has different characteristics from traditional Australian ores.

(35) Case 85/76 - Hoffmann-La Roche, (1979) ECR 461, at paragraphs 38 and 39; see also CFI, case T-102/96 - Gencor, (1999) ECR II-753, at paragraph 200.

(36) See ECJ, Case 85/76 - Hoffmann-La Roche, (1979) ECR 461, at paragraph 39; see also CFI, case T-102/96 - Gencor, (1999) ECR II-753, at paragraphs 201 and 202.

(37) Rio Tinto's sales of pellets in Europe are accounted for almost exclusively by the sales of its Canadian subsidiary, IOC.

(38) AME Consulting: Mining costs of the world iron ore industry, 1997 to 2000 (May 2001).

(39) For instance, in a common presentation made in November 2000, CVRD and JP Morgan indicated that seaborne demand for pellets was expected to increase from 75 Mt in 2000 to 95 Mt in 2005.

(40) Iron Ore Manual 2000-2001, the Tex Report.

(41) Source: The Iron Ore Market (2000-2002), May 2001 (UNCTAD).

(42) Source: The Iron Ore Market (2000-2002), May 2001 (UNCTAD).

(43) Another iron ore producer (with no current pelletising capacity) said it would not be prepared to invest in pellet capacity in the event of a 5 % to 10 % pellet price increase by CVRD/Mitsui/Caemi.

(44) The same applies to Rio Tinto's Australian operations: these mines are not potential competitors in the supply of pellets to seaborne customer areas.

(45) CVRD's net margin approaches 50 %, and its return on capital employed exceeds 20 %.

(46) There are, moreover, strong indications that natural gas prices will not remain at these exceptionally high levels over the next few years.

(47) CVRD's only source of DR lump is the Feijas mine (formerly owned by Ferteco), which produced 1 Mt of DR lump ore in 2000 (Source: Midrex Report 2000).

Schedules & Appendices

ANNEX

The full original text of the conditions and obligations referred to in Article 1 may be consulted on the following Commission website:

http://europa.eu.int/comm/ competition/index_en.html