Brendan Pearson, Chief Executive, Minerals Council of Australia reports that Prime Minister Abbott signalled today that the Government will support a parliamentary inquiry into the operation of the iron ore market. “While the inquiry is arguably not the most effective use of parliamentary resources, it will shine a critical light on a number of false claims made by Fortescue Chairman, Andrew Forrest recently about the operation of iron ore markets.

“It will also expose the folly of calls from Forrest for the Australian Government to remove his competitors’ ‘licence to operate’, to re-regulate commodity markets and to establish illegal cartel arrangements.  A focus on facts rather than rhetoric will enable a rational consideration of the importance of free and open markets and the dangers of interventions in favour of selected producers.

“The MCA is confident that the inquiry will come to the same conclusions as Australia’s competition regulator.”

The Chair of the Australian Consumer and Competition Commission, 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.”

Pearson says “misleading claims that Australia can set the global price of iron ore while accounting for only 30% of iron ore production will also be exposed.

“The inquiry will also provide an opportunity for a broader understanding of the scale of the financial contribution and community made by iron ore producers to federal and state governments.

“The minerals sector is very confident that the parliamentary inquiry will conclude:

• That the iron ore market is functioning according to market principles and, accordingly, that no government (federal or state) intervention in the operation of that market is warranted
• That the iron ore sector is contributing substantially to federal and state government revenues
• The medium term prospects for the sector’s growth are very positive.

“The export of Australian iron ore was valued at A$74.8 billion in 2013-14 and is one of the nation’s largest export earners.  Australian iron ore producers operate in a highly competitive market and any moves for Government intervention will only succeed in assisting competitors from other countries.”