The European Commission (EC) has announced its approval of the merger between Anglo-Swiss miner and coking coal producer Xstrata plc (Xstrata) and the international commodities trader Glencore International plc (Glencore). The Commission's approval is conditional on the termination of Glencore's off-take arrangements for zinc metal in the European Economic Area (EEA) with Belgium-based Nyrstar, the world's largest zinc metal producer, and the divestiture of Glencore's minority shareholding in Nyrstar.
However, the European Steel Association (EUROFER) has criticized the European Commission's approval of the merger, indicating that the remedies addressing zinc supplies are not sufficient to shield the European market from the dominant influence of one supplier.
According to EUROFER, the European steel industry, which uses the lion's share of zinc metal traded in Europe, will still have to face a leading provider effectively controlling the zinc supply chain from mining to warehousing operations. The European steel industry needs zinc for corrosion-resistant coatings applied to steel products. More than half of global zinc production goes into steelmaking.
Although Glencore has affirmed that it will terminate its exclusive off-take agreement with Nyrstar and sell its 7.8 percent share in the enterprise, EUROFER underlined that, after the merger, the parties will still have a share of around 35 percent of the European market, a level of concentration that is dangerously close to the 40 percent threshold set by the Commission.
"Glencore/Xstrata can still exert controlling influence on the zinc market, for instance by artificially shortening supplies," said EUROFER director general Gordon Moffat, referring to the vertical integration of the new entity which includes mining, smelting, trading, logistics and warehousing.