Forrest reignites call for iron ore oversupply investigation

Fortescue Metals’ chairman Andrew Forrest has once again called for a probe into the increasing levels of iron ore oversupply.

He launched the call yesterday at the Global Iron Ore & Steel Forecast Conference, demanding an investigation into the major miners ‘supply side strategy’, stating their actions have ‘crushed’ Australia’s economy.

Last year a war of words erupted between BHP, Rio Tinto, the MCA and FMG over the issue of ongoing iron ore oversupply.

Forrest claimed the major miners made a deliberate play to keep prices down by flooding the market and making statements about the future increases in production.

Blaming the majors for the bearish sentiment which befell the iron ore industry, he even went as far as to urge the public to “stand up” and ask if the multi-national miners have a social licence to operate.

“I believe it is in the national interest to fully investigate why certain industry players repeatedly made forward looking statements about oversupplying the market and how those statements contributed to the collapse in the price of iron ore,” Forrest said

FMG was also behind an online campaign , Our Iron Ore,  against ‘multinational companies’.

It urged people to sign a petition in order to ensure a “sustainable future for our important mining industry”.

“Iron ore is Australia’s most important single export earner and a dramatically falling price is putting significant pressure on current and future living standards of all Australians,” the site states.

“Australia’s export income is being savaged, along with tax and royalty returns to state and federal governments, shareholder returns, superannuation fund values, jobs and activity in the economy.”

Forrest himself went on to outline how the actions directly threaten Australia’s economy, stating, “If we don’t get responsibility coming into the future actions and the current statements of the very multinational companies that derive their fortunes from our own land then the iron ore price will continue to fall, the budget will be thrown into jeopardy, the deficit will grow and our standard of living will fall.”

The war of words prompted an abortive government inquiry led by senator Nick Xenophon, which failed to gain traction, and led Xenophon to accuse the big three miners of conducting a "furious campaign" against it.

“They say it is a commercial matter and that it should not be the subject of a public inquiry,” Xenophon said.

"But the minerals of this country are owned by the people of Australia and there are huge public policy interests at stake.”

BHP defended itself against the accusations, with CEO Andrew Mackenzie echoing prior statements by Rio Tinto’s Sam Walsh that an inquiry would send the wrong message.

Mackenzie also dismissed an inquiry, saying it would be an ‘amazing gift’ for Australia’s competitors.

“I am very confident if an inquiry goes ahead that we will see this as a well-functioning market which is in the interests of both customers and suppliers,” he said.

The Minerals Council of Australia also launched its own web campaign in order to refute the ‘myths’ made about the industry.

The then treasurer Joe Hockey quashed all future for the bill, stating that the government would not support an inquiry, despite the fact then prime minister Tony Abbott had thrown his weight behind an inquiry, stating, “We do need to know the facts … what we don’t want to see is predator behaviour by any company.”

Forrest accused the larger miners of having too much influence on the government.

"We literally saw plane loads of lobbyists get flown in by the multinationals into Canberra and they never let up all week," he said during an interview with Nine's Karl Stefanovic.

"You shouldn't be allowed to totally manipulate governments, which is what I think has been done here.

"You saw the previous government flip, this government flip. The real question is do the multinationals have too much influence in this country and we should be allowed to ask the question."

He has now reignited the fight as iron ore prices begin to falter following a short rally, stating that an inquiry is still warranted.

It came after Us iron ore miner Cliffs Natural Resources outspoken CEO Lourenco Goncalves highlighted what he believes is the major miners flawed strategy of selling ‘dirty cheap’ iron ore in order to price other players out of the market.

"Taking BHP, Rio and Vale, their combined revenue in 2014 was $US67 billion. In 2015, $US43 billion. Combined iron ore EBITDA for the three companies in 2014 was $US37 billion. In 2015, $US20 billion," he said, according to the SMH.

"Combined market capitalisation of the three companies in 2014 was $US469 billion. In 2015 $US179 billion. In other words, $US290 billion of market capitalisation was destroyed with the intention of growing market share."

“When you [Australia] have 59 per cent of the market share, what the hell do you need more market share for? What can you do with more than 59 per cent that you can't do with 59 per cent? And then you grow to 64 per cent and you destroy $US290 billion? And you guys do that and it's OK?" Goncalves said.

"I think that you should be outraged by that. I think that Australians should understand that a finite resource is being decimated and that generations to come will regret that this generation did not do a thing to stop destruction of value in this country."

Rio Tinto has rejected the statements, while BHP has declined to comment on the matter.

Brendan Pearson, the Minerals Council of Australia’s chief, did not mince words on the matter, telling the SMH, “Mr. Forrest's proposal for an iron ore inquiry is dead, buried and cremated. The notion of an inquiry never gained traction. His calls for intervention in the operation of iron ore markets are as misguided today as they were in 2015."

Iron ore has once more slipped below the US$60 per tonne mark after experiencing a massive surge earlier this week in which it soared 19 per cent in value.


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