Australia’s Prime Minister Abbott backs iron ore probe into BHP, Rio

Australia’s Prime Minister Abbott backs iron ore probe into BHP, Rio

Australia’s Prime Minister Tony Abbott says inquiry is necessary. (Image via WikiMedia Commons)

Australia’s Prime Minister Tony Abbott has backed a special parliamentary inquiry into the country’s iron ore industry, saying it was important to discover whether BHP Billiton (ASX:BHP) and Rio Tinto (LON:RIO) have behaved in a "predatory" way, severely affecting the economy.

Abbot said he believed it was necessary to pin down the exact facts behind sharp falls in prices for the country’s main export.

“I’m not in the business of demonizing any company because I’m very conscious of the fact that Rio and BHP are Australia’s biggest corporate taxpayers,” he said in a radio interview Friday. “I want them to continue making a lot of profits here in Australia.”

Joe Hockey, the treasurer, also had something to say about the issue, noting that the dramatic drop in the commodity prices has had a “big impact” on the country’s budget bottom line. He illustrated the point by adding he had been forced to write down A$90 billion in revenue in the past 18 months.

The authorities comments come on the heels of senator Nick Xenophon’s Thursday decision to pull a vote that could have launched the looming probe, which was triggered by an ongoing verbal dispute between Fortescue’s Metals Group (ASX:FMG) chief executive officer and founder Andrew “Twiggy” Forrest, BHP and Rio Tinto.

Probe to “expose” Forrest

Australia’s Prime Minister Abbott backs iron ore probe into BHP, Rio

Fortescue’s Metals Group chief executive officer and founder Andrew “Twiggy” Forrest stirred the waters early this week.

Prices for the steel making material hit $46.70 a tonne in April, the lowest in a decade, though they have picked up since then to around $62 this week.

Top producers Rio Tinto and BHP, the world's No.2 and No.3 iron ore producers respectively, have been flooding the market as of late, which has left smaller, high-cost producers struggling to survive.

Early this week, Forrest asked Australians to “bombard” their members of parliament (MPs) to demand the government intervention to stop the big miners expansion plans.

Hours later, the company launched a website called Our Iron Ore this week, seeking to drum up support for his war on Rio and BHP, the world's second- and third-largest iron ore producers respectively.

"Iron ore is Australia's most important single export earner and a dramatically falling price is putting significant pressure on current and future living standards of all Australians," the home page says under the tag: "Damaging our economy.”

The Minerals Council of Australia, which has staunchly opposed an inquiry into the matter, said in a statement Friday that while a probe was arguably not the most effective use of parliamentary resources, at least it would expose false claims made by Forrest.

“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,” concluded the council’s chief executive Brendan Pearson.