The Australian Competition and Consumer Commission (ACCC) is investigating a call by Fortescue Metals chairman Twiggy Forrest for a cap to be put on iron ore production among the big miners, including Rio Tinto, BHP Billiton and Brazil’s Vale.
“I’m happy to put that challenge out there, let’s cap our production right here and start acting like grown-ups,” Forrest said.
On ABC Radio today Forrest said he was “absolutely happy to cap my production right now” at 180 million tonnes and, if all the big players follow, “we’ll find the iron ore price will go straight back up to $70, $80, $90 [a tonne]”.
ACCC Chairman Rod Sims has asked Forrest to explain his calls for the world’s biggest iron ore producers to work together to put a cap on iron ore production.
“The ACCC will be looking closely at Mr Forrest’s comments and the context in which they were made. In general terms, any attempt by Australian businesses to encourage competitors to restrict outputs is a matter of grave concern to the ACCC,” Sims said.
“Ultimately, any success in increasing the price of iron ore in an anti-competitive way would be expected to lead to an increase in prices that Australian consumers pay for items such as whitegoods and cars.”
Cartel conduct, anti-competitive agreements, price fixing and attempts to bring about collusive arrangements are unlawful.
Forrest’s comments were made at an AustCham event in Shanghai on Tuesday night.
He said that while “competition is a really great thing” even China, which is benefiting from the lower commodity prices, is questioning why miners “are ruining this market”.
Iron ore prices have been on a downward spiral over the past 12 months, taking Fortescue’s share price with it. In a year iron ore has fallen from more than $100 a tonne to about $55 a tonne. Over the same period Fortescue’s share price has dropped from over $5 a share to about $2.
The price fall also cost Fortescue the chance to issue debt, its $US2.5 billion bonds were were pulled from sale last week after interest from US investors proved weak.