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“It is unproductive for Australia to cut or stall low cost and profitable supply when the cycle drops. It destroys value, penalises shareholders, customers and employees and disrupts the power of open markets,” he said in a speech at Minerals Council of Australia in Canberra on Wednesday June 3.
“It is these markets that induce investment, during times of higher prices, and reduce investment during times of lower prices which is exactly what we have done in our Western Australia iron ore business,” Mackenzie added.
His comments come in the aftermath of a public debate where Fortescue Metals Group (FMG) chariman Andrew Forrest, claimed that BHP and Rio Tinto deliberately flooded the iron ore market “at the cost of the Australian economy”.
The Australian government later said it would not go ahead with an inquiry into the industry as lobbied for by Forrest.
Supply growth is “the function of many countries and companies competing to meet global demand” and what has been seen in iron ore prices over the past year is no different from many other commodities in recent years, Mackenzie said.
Metal Bulletin’s 62% Fe iron ore index stood at $63.02 per tonne on Tuesday June 2, down more than 12% since the start of the year. Prices are half the value they were at the start of 2014.
While the executive acknowledged that oversupply in iron ore may persist for some time as miners lifted production during periods of higher prices, he was “optimistic” for the future.
“With each cycle, demand is greater than the previous one – and continue to rise,” Mackenzie said.
Last month, BHP said it would cut the unit costs of its Western Australia iron ore business to $16 per tonne during the 2016 financial year, down 21% from levels in the half year ended December 31.