Pick your dollar-per-tonne figure. After a minor recovery from recent lows, the iron ore price seems to be at risk of falling back again. Certainly, there’s no sustained improvement in sight. Pick your reason.
The inevitable volatility of a global commodities market? Or Chinese futures traders relying on sentiment about oversupply, thanks to Rio Tinto and BHP Billiton’s statements about future production? Or Brazil’s iron ore industry receiving new assistance from the Chinese government? Or the big miners’ success beating back Andrew Forrest’s complaints and initial prime ministerial enthusiasm for an iron ore inquiry? Or a combination?
Australia’s most senior politicians are obviously confused about the right answer. The government’s formal backing away from an inquiry on Thursday just confirmed a belated and clumsy attempt by Tony Abbott and Joe Hockey to extricate themselves from a political contradiction. They had backed an inquiry after being persuaded by a powerful combination of forces, ranging from Forrest himself, to a ravaged budget, to radio broadcaster Alan Jones criticising the damage to the national interest.
At the time, they also thought a government-led inquiry would be better managed than the prospect of another Senate inquisition dominated by Labor and independents.
The instantly hostile reaction from BHP and Rio – and some of the government’s own ministers and MPs – then convinced the Prime Minister and Treasurer their own political interest was far better spent talking up small-business tax breaks than brawling with the big boys of mining. Sound the Canberra retreat!
That also sounds certain defeat for Forrest’s calls for a national debate over whether Rio and BHP bear responsibility for such a radical price plunge. He argues his rivals’ repeated signalling of future increases in production when demand is flat effectively spook the trading market and unnecessarily damage the current price.
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