Barnett takes swipe at Rio, BHP

Originally posted by 7counsel ↑

Premier Colin Barnett has taken a swipe at mining giants Rio Tinto and BHP Billiton for flooding the world market with iron ore, thereby forcing its price down.
Speaking at a press conference this morning where he announced 1500 public sector redundancies, Mr Barnett warned the government might have to increase royalty rates for iron ore if the trend of more supply and lower prices continued.
"This seeming strategy of the two major producers to flood the market (with supply) and force the price down, I mean, remember who your landlord is - that's hurting Western Australia," he said.
"I will just make the point, you can have your corporate strategy, but there's also a sense of corporate social responsibility.
"And while you are pursuing your business strategy - which I tend to think is flawed - you are actually hurting the host State, the State that provides the iron ore and generates most of the wealth of Rio Tinto and BHP at a world scale."
This week, BHP announced plans to expand its iron ore exports by 65 million tonnes to 290 million tonnes per annum by the end of 2017.
Meanwhile Rio Tinto has already indicated it intends to hit a production rate of 360 million tonnes per annum in 2017.
Both companies have invested heavily in their Pilbara iron ore assets and infrastructure in recent years in a race to expand production and export capacity.
Meanwhile the Barnett Government is battling to deliver a promised Budget surplus as it deals with a plunging iron ore price and its effect on State royalty collections.
The iron ore price has fallen below $US80 a tonne - nearly $43 below the Government's iron ore price assumptions in the Budget.
Every $US1 below Treasury's forecast costs the Budget about $50 million in revenue over a year.
Based on prices this financial year, iron ore would have to average $135 a tonne for the next nine months to go close to the forecast underpinning the Budget.
Maintaining the current price would blow a near $1.8 billion hole in the Budget's bottom line.

from "The West Australian" 9/10/2014
https://au.news.yahoo.com/thewest/a/25221544/barnett-takes-swipe-at-rio-bhp/

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It was a genius called Marius Kloppers (since departed) who engineered spot pricing for iron ore - thus triggering a price bonanza (short lived) and a development bonanza (short lived) - and a profits tax circus (short lived) - after decades of relatively stable annual negotiations with the Japan steelmakers. The peak margin result was around a mind boggling times 5 as I remember.

And where are we now...BHP/Rio cost circa $43/44 I think?

This commodity is now a shambles to be avoided.

Revenge delivered by the Chinese side was always coming eventually.