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ACCC raises concerns about South32’s potential acquisition of Metropolitan

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World Coal,

The Australian Competition and Consumer Commission (ACCC) has issued a Statement of Issues on South32’s proposed acquisition of Metropolitan Collieries (Metropolitan), currently owned by Peabody Energy.

The ACCC is concerned that the proposed acquisition may substantially lessen competition in the supply of metallurgical coal to Australian steelmakers.

South32 and Metropolitan are two of the largest producers of metallurgical (coking) coal in the Illawarra region and the two largest suppliers of metallurgical coal to Australian steelmakers.

If South32 acquired Metropolitan, it would become Illawarra’s only supplier of large volumes of metallurgical coal in the medium term, following the expected closure of Glencore’s Tahmoor mine.

“Australian steelmakers currently appear to benefit from competition between South32 and Metropolitan in the for of lower prices and a wider product range. This transaction will remove that competitive rivalry,: ACCC Chairman Rod Sims said.

“The ACCC recognises that coking coal is a globally traded commodity where producers typically compete on a global basis. However, local competition between South32 and Metropolitan to supply the Australian steelmakers is important in determining the prices paid by Australian steelmakers,” Sims continued.

“The ACC’s preliminary view is that coal suppliers outside the Illawarra region may not act as a strong competitive constraint on South32, largely due to the additional costs to the Australian steelmakers associated with transporting material volumes of coal from other regions, such as the Bowen Basin in Queensland,” Sims said.

The ACCC has invited further submissions from interested parties in response to this state and will announce a final decision on 6 April 2017.

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