Arab Today, arab today inquiry threat into australian iron ore industry
Last Updated : GMT 10:23:16
Arab Today, arab today
Arab Today, arab today

Inquiry threat into Australian iron ore industry

Arab Today, arab today

Arab Today, arab today Inquiry threat into Australian iron ore industry

Steel-making commodity
Sydney - AFP

The huge iron ore industry in Australia faces the threat of a parliamentary inquiry amid claims the world's biggest miners, including BHP Billiton and Rio Tinto, are flooding the market to wipe out smaller competitors.

The steel-making commodity is the nation's largest export with Australia accounting for 60 percent of the world's sea-borne supply, and the slumping price has hit government revenues hard.

Budget figures last week showed that Australia's forecast tax receipts will be cut by Aus$52 billion (US$41.6 billion) over the four years to 2017-18, largely driven by the plunging iron ore price.

The price weakness has been exacerbated by the world's biggest exporters of the commodity -- BHP, Rio, and Brazil's Vale -- who make up the majority of the market and have kept lifting production levels to maintain or even lift their export share despite slower growth in Chinese demand.

This has led to smaller mining companies, which have higher production costs, battling to survive the challenging conditions.
Andrew Forrest, chief executive of Fortescue Metals, another major Australian iron ore producer, is spearheading the charge for an inquiry, alleging BHP and Rio have deliberately flooded the market to cut prices and drive competitors out of business.

His own company has been forced to lay off hundreds of workers.

"Now I believe in free markets, but when CEOs pursue business strategies which flood the market, in a last man standing race to the bottom, we don't have free markets," he wrote this month in an column for Sydney's Daily Telegraph.

Rio's iron ore chief executive Andrew Harding on Sunday said the claim was "completely false". BHP has voiced similar sentiments but the government has indicated an inquiry could be warranted.

Independent senator Nick Xenophon has been pressing for a probe, arguing that "the minerals of this country are owned by the people of Australia and there are huge public policy interests at stake".

"There are many factors at play. There are many allegations swirling around. We haven't made any final decision in this regard," said Treasurer Joe Hockey of an inquiry.

"I have spoken to all the players here and overseas and we will be making a final decision about whether we would proceed with something that is sensible and made up of sensible people over the next few weeks."

- Perception of meddling -
Canberra is said to be split, with Trade Minister Andrew Robb and Industry Minister Ian Macfarlane reportedly concerned an inquiry will send a damaging signal that the government could be seen as regulating the market.

Former chairman of the Australian Competition and Consumer Commission, Graeme Samuel, agreed that Australia must avoid any perception of meddling which could hurt its reputation as a place to invest.

He told the Australian Broadcasting Corporation that competition regulators -- not politicians -- were best served to investigate allegations of market manipulation.

"I think the problem with politicians getting involved is that we get into a political theatre with parliamentary inquiries and we tend to get a confusion then between what is in the public interest and what is in a political interest or serving political purposes," he said.

Prime Minister Tony Abbott hedged his bets when asked about the matter over the weekend, with Rio and BHP two of Australia's most powerful corporate entities.

"Rio and BHP are our largest corporate taxpayers. I want them to continue to flourish but I also want a level playing field, I want to ensure that there's no predatory behaviour, I want to ensure that everyone is able to compete freely in an open market," he said.
He added that his government was not one that "interferes with free markets" and any inquiry must not be "a witch hunt".

The price of ore has dived by 60 percent over the past 12 months to reach a decade-low of US$47.08 per tonne in early April.

Rio's Harding told the ABC he was sure any inquiry "will establish that there is an operating market on a global platform and that it's free and transparent".

The Minerals Council of Australia backed this stance, with chief executive Brendan Pearson saying in a statement there were simply "normal market forces at work".

 

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Arab Today, arab today inquiry threat into australian iron ore industry Arab Today, arab today inquiry threat into australian iron ore industry

 



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