Fortescue Metals Group has cited the finer points of the Australian Competition and Consumer Act to justify calls by its chairman Andrew Forrest for Australia's biggest iron ore miners to cap production in order to lift prices.
Fortescue Metals Group has cited the finer points of the Australian Competition and Consumer Act to justify calls by its chairman Andrew Forrest for Australia's biggest iron ore miners to cap production in order to lift prices.
FMG said the provisions of section 51(2)(g) of the Act deal with goods exclusively exported.
"The comments made by the chairman were highlighting the point that a last man standing fight for market share will damage shareholders of all companies and is not in the long-term interests of our host nation Australia or of our customers," FMG chief executive Nev Power said in a statement.
"Those comments were intended to draw attention to the fact that there is provision in Australia's competition law dealing with the potential for discussions to be held by exporters."
His statement came after Australian Competition and Consumer Commission chairman Rod Sims urged FMG's chairman to explain his comments.
"The ACCC will be looking closely at Mr Forrest's comments," Mr Sims said.
"Cartel conduct, anti-competitive agreements, price fixing and attempts to bring about collusive arrangements are very serious matters that the ACCC vigilantly detects, disrupts and deters."
Mr Sims added that any attempt by Australian businesses to encourage competitors to restrict output to boost prices was a matter of grave concern.
Such arrangements did not need to be put into effect to be in breach of the law, he said.
Mr Forrest raised alarm bells for the watchdog after telling a business dinner in Shanghai overnight that he would be happy to cap Fortescue's iron ore production at 180 million tonnes a year.
He claimed that if Rio, BHP and Brazil's Vale capped production, it could help prices for Australia's biggest export recover to around $US90 a tonne from their current lows of about $US55.
"I'm happy to put that challenge out there: let's cap our production right here and start acting like grown ups," Mr Forrest said.
His comments are the latest salvo in a war of words between Fortescue and its bigger rivals, BHP Billiton and Rio Tinto, over who is to blame for the world's iron ore glut, which has pushed prices of the commodity below $US60 a tonne.
However, if Fortescue set a cap of 180mt, it would still have to increase production from its current rate of 164mt a year into an oversupplied Chinese market.
Rio and BHP bosses last week blamed Fortescue for increasing the glut as they fended off accusations of flooding the market and hurting local producers.
But Mr Forrest has hit back, singling out Australia's biggest miners for harming the national interest.
"When you're just driving for market share at any cost and just smashing the revenues of your host nation and you're smashing the revenues of your shareholders, in the end you smash your own personal credibility," he told the business dinner.
"Why don't those companies who derive their fortunes from our nation act like grown ups and just agree to cap their production."
Prime Minister Tony Abbott rebuffed Mr Forrest's calls, saying Australia supports a free market, while Treasurer Joe Hockey said the government did not support cartels.
"Prices can go down as well as up and that has consequences," Mr Abbott said.
Mr Power's statement said modern economists viewed a strategy of depressing prices to concentrate market share as too expensive to be considered rational.
"It destroys value in a similar way to predatory pricing and is not in the long run interests of Australia or our customers," he said.
The 50 per cent slump in iron ore prices in the past year to below $US55 has slashed Fortescue's earnings and cashflow, sending its share price down 27 per cent in 2015.
