FIX IT TONY
...it ain't rocket science
Four-time Walkley Award winning political commentator and Churchill Fellow, has returned to the fray over concern that the integrity of news dissemination is continually being threatened by a partisan media.
What’s happening to our ore price is no more than free enterprise in action but of course the Greens and Labor can’t spell the words “free enterprise”. At the very mention of ore they want to tax multinationals even further offshore, they want a bigger share of the smaller cake and they want to impress on everyone that our minerals belong to all of us.
Well they don’t belong to all of us any more than do the fish found in our oceans or the oil found in our basins.
BH-P and Rio are purposefully oversupplying the world market in the same way that Saudi Arabia is oversupplying oil with the intention of killing off competitors that need a higher price for profitable extraction.
The Saudis can make good money at around $40 a barrel, oil shale and gas producers cannot, so after the smaller guys are forced to close shop, the price mysteriously returns to $110.
Last year, the price of iron ore fell below Fortescue's operating costs while Hockey’s budget assumes iron ore will trade at a minimum of Fortescue's $48 per tonne operating costs, so Tony Abbott and Joe Hockey have an interest in Fortescue remaining solvent as a marker.
Unfortunately Fortescue's share price has fallen from 6.02c in February 2014 to 2.30c now.
One Pilbara mine exported 30% more ore this financial year than in the second half of 2013... an incredible 26.3 million tonnes more than the ore shipped during the entire 2010-11 period when prices were at their peak. The figures speak for themselves.
The ACCC claims that stockpiling of ore to maintain the price “could be illegal”, but Fortescue’s Twiggy Forrest’s suggestion is entirely legal and shows just how out of touch 'shiny bum' public service Agencies actually are.
We have been stockpiling wool and wheat and all other non-perishables to maintain export prices for 100 years... and so has every other international competitor.
But Twiggy Forrest’s radical suggestion of a cartel may have unforeseen consequences, like inviting other international players into the market.
Australia needs at all costs to maintain itself as the world’s biggest and most reliable producer of high grade iron ore.
But no Senate inquiry is needed, this loony menagerie of Senators knows nothing about the politics of ore and anyway Sam Dastyari’s only interest in ore is that he gets an extra $30,000 each time he puts his hand up for Chairman of another inquiry, so he’s quite happy.
Unfortunately, Abbott is suggesting he will go along with an inquiry only because it saves him making a decision.
Yet Tony Abbott knows exactly what’s happening and why. The surge in production, which has been mainly irrespective of demand, came at a heavy cost to Fortescue. Ore prices averaged around $US160 a tonne in 2010 and, despite a recent surge to around $60 a tonne, have been trending erratically to below $40 a tonne.
What should happen is that Abbott summon Rio, BH-P and Fortescue to a meeting to sort it out. Either Australia will benefit from having a smaller player like Fortescue in the ore export mix or it won’t. If it will benefit the nation then Abbott needs to tell the big two to cut it out and stop flooding the market with cheap ore.
The big two would have no choice but to comply! Claims that this would be illegal and would upset export markets is a load of old frog droppings. Abbott could easily achieve this simply by threatening a super tax on exports above a certain tonnage level in any one period until further notice.
If Fortescue is not considered essential then throw it to the wolves... Twiggy more than anyone knows the price of free enterprise.
All export markets, including China, will buy whatever they need, and at the current market price or on indent, as they always have done, even when the ore price was $160 a tonne.
If they believe the price will drop they forward buy, if they believe the price will rise they will buy now and stockpile it themselves. That’s the way it works... it’s not rocket science.
There is a destructive shit fight going on in iron ore production and we need another Senate inquiry like we need a bloody hole in the head.
What we DO need is a bit of leadership from Abbott.