Fortescue Metals Group chairman Andrew Forrest has told The Australian that the irresponsible “oversupply” of iron ore by his major competitors, Rio Tinto and BHP Billiton, is all but over.
Forrest, who was instrumental in the development of FMG from an explorer in 2003, to exporting more than 165 million tonnes of iron ore in the last financial year, has long-said his bigger competitors – BHP and Rio – have intentionally grown at an irresponsible rate in recent years.
The oversupply, Forrest has argued, has intentionally flooded the market, cutting into the iron ore price and squeezing out most minor players.
But that era is just about over, the FMG chairman told The Australian this week.
“I am not a bull on the iron ore price,” he was quoted as saying. “The vandalism of the oversupply strategies which I called out a year ago is being vindicated.”
Forrest indicated that the recent retirement of Rio boss Sam Walsh could trigger a shift in philosophy at the mining giant.
“You can see the ramifications now in the changing of the guards in a new era of value over market share,” he reportedly said.
“That is a good thing but that damage will take a while to work its way through the system.”
Forrest’s campaign against Rio and BHP’s supply strategies reached its peak last year, when he launched a social media campaign asking Australians to sign the ‘Our Iron Ore’ petition, to let the government know that its people wanted an inquiry into alleged market flooding by the two giants.
Rio’s iron ore chief Andrew Harding responded at that time, telling staff in a memo that the allegation of market manipulation through intentional oversupply was “totally unfounded”.
“We operate in a highly competitive global market, where over the last decade, our market share has remained stable at 20%,” Harding was quoted as saying in a number of media outlets.
“We take no comfort from [other industry participants] struggling with the [iron ore market] change and we have also seen some good people leave our company.”
Harding later told the AFR he was “absolutely stunned” by the ‘Our Iron Ore’ campaign.
Former BHP Billiton chairman Don Argus told The Australian that the country would become a “laughing stock of the world” if an inquiry resulted in the government intervening in the iron ore market.
But perhaps the most significant response came from BHP boss Andrew Mackenzie.
In an interview with Radio National at the time, an unusually curt Mackenzie told host Fran Kelly that an inquiry would be “a ridiculous waste of taxpayers’ money to provide a basic economics course on supply and demand”.