Flooded iron ore market needs ACCC spotlight: former Rio staffer
8 December, 2014
Former Rio executive Mal Randall said the move by iron ore majors to increase production at a time the market is oversupplied should be investigated by the ACCC.
Randall also said the Chinese wouldn’t let BHP Billiton, Rio Tinto and Vale call the shots for long, and expects a spate mergers and acquisitions take place.
The comments come as the price of iron ore was trading at $US71.10, up from five-year lows of around $US68 a tonne.
The value of the commodity has crashed by nearly 50 per cent this year, with many blaming the huge amount of tonnes coming from the likes of BHP and Rio in the Pilbara.
Plans by the majors to keep expanding their iron ore mines has come under fire from a spate of critics of late, including WA’s Premier Colin Barnett and FMG’s CEO Nev Power.
Barnett accused Rio and BHP of working “in concert” while Power said the strategy seemed to be aimed at trashing the market.
Randall said more mining houses should voice their concerns publicly, The Australian reported.
“There has to be more voices on what is happening at the moment. I’m surprised that some of the managing directors and chairs of these companies are not out there talking about this,” he said.
“The loser is going to be Australia. They need to stand up and point the finger at BHP and Rio and not accept the reasons why they are flooding the market.”
Randall rubbished rhetoric by the majors that more tonnes of iron ore would soon push high-cost Chinese producers out of the market.
“If Beijing has a choice between subsidising and unemployment, it’s going to be subsidising,” he said.
“There are probably some good opportunities for Chinese steel mills to start looking in Australia. I don’t think they will allow a scenario to develop where there is only Rio, BHP and Vale.”
Iron ore miners in Australia are hurting as the current iron price tests their break-even costs.
Last week Atlas Iron cut 80 jobs and implemented board member pay cuts to deal with the tough market conditions.
This was closely followed by FMG’s announcement that it would cut capital expenditure by around $US650 million and cut loose three board members.
At least two iron ore mines have already shut down as a result of the iron ore crash.
An analyst out of China has warned the price of iron ore could fall to lows of $US50 a tonne as a result of oversupply and a fall in Chinese steel production.
