(Sept 17): China’s MMG Ltd pledged to maintain or increase nickel supplies to Europe after its planned US$500 million (RM2.02 billion) deal with Anglo American plc ran into regulatory concerns.

In a preliminary opinion on Wednesday, the European Commission said it feared that MMG’s purchase of Anglo’s operations in Brazil would divert low-carbon ferronickel supply away from European markets, resulting in higher prices for stainless steel.

MMG pushed back against the concerns, saying Europe is the most attractive market for the Brazilian ferronickel, and that the company has no incentive or plan to redirect supplies to China.

“We are doing everything possible, including offering whatever guarantee we can to European customers directly, or to the Commission,” Troy Hey, MMG’s executive general manager for corporate relations, said in interview. The company intends to deliver supply to Europe at least at the levels currently provided by Anglo American, and could potentially increase those volumes, he said.

Anglo agreed last year to sell its nickel operations in Brazil to MMG, prompting EU regulators to investigate due to fears that the buyout could jeopardize supplies of ferronickel, a raw material for stainless steel.

“Such a diversion of supply, combined with limited alternative supply sources, could adversely affect the price of low-carbon ferronickel” with negative implications for European stainless steel producers and their costs, the Commission said.

An Anglo American spokesperson said the Commission’s assessment ignored significant expansion of ferronickel supply over the last 12 months. 

“European customers of ferronickel benefit from competitive, diverse and increasing supply from numerous producers across Latin America, New Caledonia, South Korea, Indonesia, Japan and others,” the spokesperson said in email response to Bloomberg request for comment, adding that the transaction will maintain, rather than consolidate the number of suppliers. 

MMG can now respond to the EU and request an oral hearing. The Commission has until Nov 30 to make a final decision. 

MMG’s acquisition of Anglo’s business would expand the presence of Chinese companies in global nickel production, which includes major investments in Indonesia. The Hong Kong-listed firm operates projects from Australia to Africa and South America and is controlled by state-owned mining-to-trading giant China Minmetals Corp. 

The transaction would mark MMG’s entry into nickel output, adding Anglo’s Barro Alto and Codemin operations in Brazil that together produce about 40,000 tonnes a year of nickel contained in ferronickel, as well as two undeveloped projects.

Hey said blocking the deal would hurt all sides, potentially curbing investment and employment in Brazil while reducing nickel supply rather than improving competition.

“It has been more difficult than we thought,” Hey said. But “we are all in on this transaction and on following it through and completing.”

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