Rio Tinto, BHP Kill Ore Marketing Plan

NEW YORK (TheStreet) -- Australian mining giants Rio Tinto(RTP Quote) and BHP Billiton(BHP Quote), under pressure from their steel-mill customers around the world, have changed up the joint venture they formed in June to extract and sell iron ore from their mines in Western Australia.

Under the original plan, 15% of the ore produced by those mines would have been marketed and sold by the joint venture, independent of both Rio and BHP. But steelmakers, already uncomfortable with the status quo of having to buy their most important ingredient from only three companies (the third being Brazil's Vale(VALE Quote)), have criticized the notion of two of those giants pooling their ore assets.

In Europe, steel companies have pushed the European Union to investigate the venture for antitrust violations. Chinese officials have publicly wondered whether the venture would eventually fall apart over the same kinds of monopoly concerns.

In what appears to be a concession to these critics on the part of Rio and BHP, the companies have scuttled the joint venture's co-marketing plan, agreeing to handle the selling of the ore separately.

In a press release, Rio and BHP said they believe the change "will clarify the nature of the JV for customers and emphasize its focus on realizing significant production and development synergies."

On the surface, the two companies struck up the joint venture in order to save billions amid the global recession. But the plan also allowed Rio a way out of an earlier deal with the huge Chinese state-run aluminum concern, Chinalco, which would have bought a stake in Rio -- an equity infusion that the debt-ridden miner at one time desperately needed. But as market conditions, and commodities prices, have recovered, Rio's financial standing improved enough that it no longer needed Chinalco's money.