BlueScope's plan to take over OneSteel's sheet and coil distribution business has hit a hurdle, with the Australian Competition and Consumer Commission finding "strong concerns" about the deal's impact on the market.
ACCC chairman Rod Sims has outlined a "preliminary view" that the deal could remove significant competition to BlueScope's sheet and coil distribution.
"Market inquiries have identified strong concerns that the proposed acquisition would remove OneSteel Sheet and Coil as an effective competitor and the main alternative to BlueScope in Western Australia, particularly for customers that require processed sheet and coil products," he said.
‘‘The ACCC is not satisfied that the other sheet and coil distributors in WA would represent a viable alternative to BlueScope post-acquisition.’’
This stance by the ACCC indicates there could be troubles with any future merger or acquisition attempts between BlueScope and Arrium (formerly OneSteel).
There has been speculation for years about potential mergers between the two companies, Arrium with its blast furnace in South Australia and BlueScope at Port Kembla.
But given they are the only two steelmakers in Australia, there are likely to be competition issues identified whenever one company tries to acquire part of the other.
It has been a busy end to 2013 for the resurgent BlueScope. Earlier this month, the ACCC announced it would not oppose BlueScope’s purchase of the Orrcon Steel business from Hills Holdings.
There, the ACCC found customers would have sufficient options other than BlueScope when buying tube and pipe – including relying on more imports.
The ACCC is also considering BlueScope’s bid to buy Fielders, its competitor in the roll-formed steel products market. The ACCC has raised some concerns about the impact of this deal, but not in terms as strong as in its preliminary OneSteel opinion.
The ACCC has now called for comment on the OneSteel deal before a final decision, slated for February 20, 2014. Comments must be made before January 24.
BlueScope has previously declined to comment on the OneSteel plan, saying it will await the ACCC’s decision.