Leading steel industry bodies will lodge formal objections to a controversial iron ore venture between Rio Tinto and BHP Billiton following the launch yesterday of a European Commission investigation into the deal.

    Steelmakers in China, Japan and Europe have all opposed the tie-up between the mining giants, saying the joint venture will tilt the global iron ore market further in favour of three producers who already dominate the seaborne iron ore trade. The EU's competition watchdog will study the plan by the two companies to unite their operations in the world's richest iron ore belt in western Australia, which jointly produces nearly 40 per cent of the world's seaborne trade.

    Key players in the mining and steelmaking industries view the Commission's investigation as the most important among competition reviews expected in Japan, Australia and China.

    The Brussels-based body has raised objections to the consolidation of the two companies' iron ore operations in western Australia in the past.

    BHP and Rio have said that the deal is a “production-only joint venture” that will bring together overlapping operations, while keeping the marketing of iron ore separate. Lawyers for Rio and BHP argue the joint venture proposal is fundamentally different from the merger proposal which the Commission raised objections to in 2008.

    “[Steel companies] are conflating the full merger with the operational-only joint venture,” said a lawyer close to the companies, suggesting that opponents had not even glanced at the structure intended to prevent anti-competitive behaviour.

    Steel industry bodies in early December rejected the venture's claim that it could separate production and marketing and said they would formally oppose the deal before the Commission in Brussels, and antitrust organisations in other countries.

    “Pricing is based on differences in product and availability and both are eliminated in this joint venture,” a European steel executive told the Financial Times.