Australia: Fortescue hits back on cartel comments

Fortescue Metals Group has hit back at critics of chairman Andrew Forrest’s controversial call for an effective iron ore production cartel to address collapsing prices, accusing the company’s rivals of exacerbating industry cycles and causing a “massive” transfer of wealth out of the country.

FMG chief executive Nev­ille Power staunchly defended comments by his chairman in Shanghai earlier this week. “If you look at our industry, the current iron ore price is not good for anyone,” he said.

Chinese steel giant Baosteel, which was Fortescue’s first customer, joined the growing condemnation, saying Mr Forrest’s call for a cap on iron ore output to revive prices was “not good for fair competition”

“Companies should follow the laws of the market,” Baosteel chief financial officer Zhu Kebing was yesterday quoted by Reuters.

In response the FMG chief said they would much prefer consistency and stability in prices rather than wild swings.

A lot of customers, he said, wanted to return to the old mechanism of benchmark pricing, where prices were set as a result of annual negotiations between producers and customers.

“I think spot pricing is better because it promotes the right signals back into the market and creates transparency,” Mr Power said.

Full Content: The Australian Business Review

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