Forrest renews iron ore inquiry calls

Fortescue Metals Group chairman Andrew Forrest has renewed his calls for an inquiry into the iron ore industry as the Australian economy suffers under the weight of slumping commodities prices.

Mr Forrest has been pushing for an inquiry into iron ore price volatility since early last year and warned key local infrastructure would not be built as weaker iron ore prices left a shortfall of billions of dollars in federal revenue.

"For every $10 (per tonne) down you are probably $US50 billion out of the economy," Mr Forrest told reporters on the sidelines of the Global Iron Ore and Steel Forecast Conference in Perth today.

"That's schools and roads and hospitals which can't be built.

"It deserves an investigation into a supply side strategy to crush competition which did nothing but crush the Australian economy."

BHP Billiton and Rio Tinto have defended their strategies of increasing production to maintain market share as being in the best interest of shareholders.

But Mr Forrest said there had been an aggressive attempt to eliminate competition despite the consequences for the Australian economy.

Cliffs Natural Resources chief executive Lourenco Goncalves said that, during the past year, $290 billion of market capitalisation had been destroyed as the big miners tried to grow their share while increasing production into an oversupplied market.

"When you have 59 per cent market share, what the hell do you need more market share for," he said.

"Then you go to 64 per cent and you destroy $290 billion to do that, and you guys feel that is okay? You should be outraged by that."

Mr Goncalves said Australians should understand that a finite resource was being decimated and nothing was being done to stop the destruction.

Chinese steel producers were also not benefiting from lower iron ore prices, he said.

Meanwhile, the Australian Competition and Consumer Commission has sought further information from Fortescue on its proposed tie-up with Brazilian iron ore giant Vale.

Fortescue yesterday announced it was in talks with Vale to strike a deal that could give the Brazilian company a stake up to 15 per cent, and help the two miners boost their combined market share in China.

The ACCC said it was aware of the proposed joint venture and is seeking further information from the parties.

"We will look at it, but in saying that, we are not necessarily signalling any concerns," ACCC chairman Rod Sims said.

Under the preliminary agreement signed by the two companies, Vale could buy up to 15 per cent of Fortescue's shares on market, and would also have the option of taking stakes in its existing or future mining assets.

Both companies will also form a joint venture for blending their iron ore at key Chinese ports, which could help them match the benchmark quality in the largest iron ore market, and help take share away from rivals BHP Billiton and Rio Tinto.

Yesterday, Fortescue chief executive Nev Power had said the agreements would be subject to various regulatory approvals, but expected the process to be completed smoothly as the deal would not lead to reduced competition in any of the geographies.

Fortescue said there there was no leak of confidential information regarding the tie-up, ahead of the announcement.

The company was responding to a query from the Australian Securities Exchange, asking it to explain a 24 per cent jump in its shares on Monday, a day before it announced the agreement.

The surge in the share price was consistent with the 23 per cent increase in iron ore prices on that day, it said, on hopes of a short-term steel production boost in China.

Fortescue said the memorandum of understanding with Vale was confidential but both companies had agreed to work together on the terms of separate but complementary stock exchange releases as they recognised the potential for a leak.

Shares in the company were trading 15 cents, or 5.4 per cent lower, at $2.64 this morning.

Several analysts have cut their rating on the stock.