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Australian competition regulator raises concern over South32's Metropolitan colliery deal

EBR Staff Writer Published 24 February 2017

The Australian Competition and Consumer Commission (ACCC) has raised concerns over the proposed $200m acquisition of Metropolitan Collieries by BHP Billiton spinoff firm South32 from Peabody Energy.

Last November, South32 agreed to acquire Metroploitan mine and 16.67% stake in New South Wales’ Port Kembla coal terminal from Peabody Energy.

South32 and Metropolitan are two of the largest producers of coking coal in the Illawarra region, as well as largest suppliers of coking coal to the steelmakers in Australia

The chief competition regulator raised concern saying that the proposed acquisition may significantly reduce competition in the supply of coking coal to the steelmakers in the country.

According to the regulator, after Glencore’s Tahmoor mine closes, South32 would become Illawarra’s lone supplier of coking coal in the medium term.

With a 28 million tonne proven and probable coal reserve, the Metropolitan colliery mine can produce 2.3-million tonnes per year.

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

 “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.”