Australia’s Government: No Iron Ore Industry Inquiry


BHP Billiton CEO Andrew Mackenzie said a
government- mandated investigation into Australia’s
iron ore industry would be an ‘amazing gift’ to its
competitors.
The government of Australia announced on May 21 that it would not back a parliamentary inquiry into the country’s iron ore industry and the iron ore market. “After discussing the issue with regulatory bodies and stakeholders across the resources sector, the government will not be initiating an inquiry at this time,” Australian Treasurer Joe Hockey said.

Fortescue Metals Chairman Andrew Forrest had been the most vocal backer of the suggestion for a parliamentary inquiry, charging that Australia’s two largest iron ore producers, BHP Billiton and Rio Tinto, were purposefully pursuing a low-price strategy in order to push smaller, highercost iron ore producers out of the market.

On May 19, BHP Billiton CEO Andrew Mackenzie, speaking during an interview on Australia’s ABC radio, said a government iron ore inquiry would send the wrong signal to international customers about the country’s commitment to free trade. Such an inquiry would imply an intention by the government to interfere in the market, he said, and would be an “amazing gift” for Australia’s competitors, given iron ore is a globally traded commodity with other major sources of supply around the world in countries such as Brazil, South Africa, India, and China.

Mackenzie said BHP Billiton supported Australia’s focus on trade and competition as drivers of growth and was committed to playing a role in improving the nation’s competitiveness. He noted Australia’s reputation as a global policy leader on trade issues.

“I believe that free trade is absolutely critical for the future of Australia and its place in the world. It’s good for the world economy, and it’s good for geo-political harmony when people feel that they can count on Australia for the supply they need to grow.”

In line with comments by the Australian Competition and Consumer Commission, Mackenzie said an inquiry could only conclude that the global iron ore market operates according to market principles and no intervention is warranted. The suggested inquiry would turn out to be nothing more than a basic economics course on supply and demand, he said, and would be “a ridiculous waste of taxpayers’ money.”

Benchmark iron ore prices hit a 10-year low at $46.70/metric ton (mt) in early April before rebounding to more than $60/mt in mid-May and then retreating to under $58/mt on May 21.

As featured in Womp 2015 Vol 06 - www.womp-int.com