BHP Billiton: an inquiry into Australia’s iron ore industry is unnecessary

Image credit: BHP Billiton website

BHP Billiton’s Chief Executive Andrew Mackenzie slammed the Federal Government’s announcement that it is considering to hold an inquiry after smaller mining companies had complained that BHP and Rio Tinto are deliberately driving down the price of iron ore.

Image credit: BHP Billiton website
Image credit: BHP Billiton website

The Chair of the Australian Consumer and Competition Commission (ACCC), Rod Sims, indicated last month that the operation of iron ore market reflected normal market forces at work.

“To suggest BHP and Rio [Tinto] are engineering this fall [in prices] seems misguided. They are doing what they always have, which is to produce what they have invested in and I am surprised people would think they would do otherwise,” Mr Sims said.

According to Mr Mackenzie, an inquiry would damage Australia by creating uncertainty and costs, without revealing any information.

He pointed out that Australia has a reputation as a global policy leader on trade issues and that such an inquiry would hurt the country and send the wrong message to international customers.

“I believe that free trade is absolutely critical for the future of Australia and its place in the world,” Mr Mackenzie said.

“It’s good for the world economy and it’s good for geo-political harmony when people feel that they can count on Australia for the supply they need to grow.”

According to him, BHP Billiton had stated on numerous occasions that supply growth would exceed demand growth and that the company acted early and deferred around 180 million tonnes per year (Mtpa) of growth opportunities in 2012 – 110 Mtpa from the Outer Harbour Development and 70 Mtpa from two additional berths not taken up in the Port Hedland inner harbour.

Mr Mackenzie added that an inquiry would conclude that the global iron ore market was operating according to market principles and no intervention was warranted.

“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 export of Australian iron ore was valued at $74.8 billion in 2013–14 and is one of the nation’s largest export earners.