In Commodity News 22/05/2015
Intense lobbying efforts all week by Australia’s third-largest iron ore miner Fortescue Metals Group failed to meet immediate aims of pushing the government to carry out an inquiry into the industry, with announcements that there would be no such inquiry made.
“Over recent days, there has been some speculation about whether a parliamentary inquiry into the iron ore sector was necessary,” Australia’s Federal Government Treasurer Joe Hockey said Thursday. “After discussing the issue with regulatory bodies and stakeholders across the resources sector, the Government will not be initiating an inquiry at this time.”
Thursday’s announcement put an end to uncertainty over whether an inquiry would take place, especially after Prime Minister Tony Abbott said late last week that he would back an inquiry into the iron ore industry.
More recently this week, however, Abbott appeared to have taken his earlier sentiments in a different direction as he said Tuesday that no decision had been made about an inquiry and that “the last thing this government would ever want to do is interfere in a free market like the iron ore market.”
FMG’s initiative to push the government into making a parliamentary inquiry aimed at putting pressure on the country’s two largest iron ore producers — BHP Billiton and Rio Tinto — to cut production in order to allow the supply glut to ease and spot prices to recover.
The campaign, titled Our Iron Ore, was officially launched Sunday by FMG with the aim of rallying Australians to sign a petition against miners continuing to increase production despite its implications for ore prices and the Australian economy.
After the launch of the campaign, BHP Billiton and Rio Tinto hit back by saying an inquiry into the Australian iron ore mining industry was not required and would send the wrong signal to international trading partners about the country’s commitment to free trade.
“I believe that free trade is absolutely critical for the future of Australia and its place in the world,” BHP Billiton CEO Andrew Mackenzie said on local radio Tuesday. “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.”
Mackenzie added that an inquiry into the iron ore industry would be an “amazing gift” for Australia’s competitors in Brazil, South Africa, India and China.
Other regulatory bodies like the Australian Competition and Consumer Commission were also largely unsupportive of an inquiry, saying it would inappropriately interfere in a globally traded commodity market like iron ore.
