SINGAPORE, May 15 (Reuters) – Any inquiry into the collapse of iron ore prices by the Australian Senate is likely to provide a great opportunity for political point-scoring for a domestic audience, but won’t address the main issue.
It’s still not clear whether independent Senator Nick Xenophon has enough support from the major parties, the ruling Liberals and the opposition Labor, to launch an inquiry, but he did receive backing for the idea from Prime Minister Tony Abbott.
If any inquiry did go ahead, it would provide a platform for Andrew Forrest, the chief executive of No.4 iron ore producer Fortescue Metals Group, to continue his campaign against the expansions of No.2 and No.3 miners, Rio Tinto and BHP Billiton.
Forrest would most likely relish the chance to continue to portray his company as the tough “Aussie battler” being bludgeoned by heartless multinationals that have failed to act in the interests of Australia and its people.
While this sort of attack may play well in the domestic media arena, it’s also likely that any Senate inquiry would find that BHP Billiton and Rio Tinto haven’t done anything illegal in ramping up iron ore output to levels beyond demand growth.
In fact, it’s likely that the two mining giants would be able to win the argument that the massive expansions at their Western Australia state mines were logical and made business sense in the light of their low-cost advantage.
But whatever spectacle emerges, assuming an inquiry does go ahead, it won’t address the main issue of who is right on the future of China’s iron ore and steel sectors.
IRRECONCILABLE MARKET VIEWS
On the one hand are the three major miners, Brazil’s Vale , Rio Tinto and BHP Billiton, who are sticking to their view that Chinese steel demand and output still have some way to rise.
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