Fortescue to BHP, Rio: Don't hurt our relationship with China
Nursing a 36% drop in his company's share price in just three months (versus much more modest declines for his Australian rivals), Andrew “Twiggy” Forrest may be forgiven for lashing out.
The billionaire founder of Fortescue Metals Group who built the company into a 155 million a year producer within eight short years on Wednesday said BHP Billiton and Rio Tinto are threatening Australia's relationship with China.
That's because the Anglo-Australian giants together with Brazil's Vale are putting Chinese iron ore miners out of business (hundreds of domestic miners have closed and those remaining are running at 47% capacity) by flooding the seaborne market with cheap supply says Forrest:
“They have said they’re out to restrict the growth of other companies and restrict other opportunities being brought into the marketplace by their competitors,” Mr Forrest said.
“To me I think that’s a very fine line to tread when your major customer is one of those people you are trying to shut out of the market.
“I wouldn’t have thought it’s a very customer-friendly policy and I only hope that it doesn’t have any impact on the bilateral relationship with China which is very strong.”
“No doubt they have their underlying wisdom — they just haven’t shared it with the rest of the market.
While Beijing certainly would prefer fewer mineworkers losing their jobs, the fact that the country's steel industry is reliant on imports for 70% of their needs, are looking for higher quality at lower cost to curb emissions and improve profitability, on the whole China may welcome the current price of $75 a tonne.
Forrest is just talking his book of course: FMG sells lower Fe content than the Big 3 and China buys just about all of the A$9.6 billion firm's output.
At least Forrest is not calling for an investigation into collusion by Rio and BHP like the West Australian Premier did recently as state revenues from the Pilbara decline along with the iron ore price.
Continue reading at The Australian BusinessNow.