PERTH (miningweekly.com) – The Western Australian Chamber of Minerals and Energy (CME) on Wednesday stepped in to defend the state’s iron-ore developers, saying they were meeting current global demand.
The CME’s defence comes as Premier Colin Barnett lashed out at majors BHP Billiton and Rio Tinto, accusing the pair of likely collusion.
“I find it a strange policy, indeed a flawed policy, that the major iron-ore producers would be putting more and more product into a declining, soft market,” Barnett was quoted by local newspapers as saying to Parliament on Tuesday.
“If you are selling a product into a market and the price is falling and falling at a very fast rate, the normal commercial reaction would be to cut back on supply into that industry.”
He noted that it seemed the majors were acting "in concert".
Both BHP and Rio have been pushing to expand their Pilbara capacity, with BHP expected to produce some 225-million tonnes of iron-ore by 2015, while Rio was ramping-up production to 360-million tonnes a year.
However, CME CEO Reg Howard-Smit said on Wednesday that the state’s iron-ore producers have expanded their capacity over the past decade to meet a growing market.
“Western Australia is not the only supplier of iron-ore. Other companies and jurisdictions around the world are pushing to get their product to market. If Western Australian producers don’t meet the demand in the world market, then other significant players such as Brazil, Russia, China, India and emerging producers in Africa will take advantage,” said Howard-Smith.
“This clearly makes iron-ore producers in Western Australia price-takers not price-makers.”
The CME pointed out that royalties from mining operations in the state have grown from A$5.2-billion in 2012/13 to A$6.9-billion in 2013/14 – a substantial 33% increase, with iron-ore royalties accounting for more than 90% of total state royalties.
The state government expected iron-ore production growth would average 6.8% over the next four years.
“Notwithstanding volatile commodity prices, the major challenge facing the Western Australian resources sector is the high cost of doing business. Improving our international competitiveness will stimulate further growth and deliver ongoing benefits to the community,” said Howard-Smith.