IRON-ORE ECONOMICS 101
Australian iron-ore mining company Fortescue head Andrew Forrest has launched a scathing attack on two of the world’s biggest iron-ore producers, Rio Tinto and BHP Billiton, accusing them of forgetting that the iron-ore they are extracting is a national patrimony that should not be squandered. Being Brazilian, Vale, the other major global iron-ore producer, has escaped Forrest’s tongue lashing, which included charging Rio and BHP with costing the Australian economy between A$50-billion and A$60-billion a year through failing to recognise the basic rule that oversupply leads to lower pricing. Forrest censured the giants for acting irresponsibly and forgetting that Australia, as a country, was highly dependent on an iron-ore margin. Any additional production would feed a demand mirage and crush the crucial commodity’s price prospects.
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