By James Glynn
SYDNEY--The Australian government said Thursday it will not seek
to hold a special parliamentary inquiry into recent activity in the
iron-ore market, backing mining giants in a bitter row which had
roiled the country's powerful resource industry.
"After discussing the issue with regulatory bodies and
stakeholders across the resources sector, the Government will not
be initiating an inquiry at this time," Treasurer Joe Hockey said
in a statement.
The decision represents a turnaround for the conservative
government after Prime Minister Tony Abbott last week backed a
special inquiry, saying it was important to discover the facts
underpinning sharp falls in prices for the country's chief
export.
Independent Senator Nick Xenophon has been calling for
parliament's economics committee to investigate claims that mining
giants BHP Billiton Ltd. and Rio Tinto PLC are driving down prices
by boosting supply to undermine smaller competitors, while also
delivering an A$18 billion blow to Australia's budget through lost
revenue.
Fortescue Metals Group Ltd. Chairman Andrew Forrest, who
campaigned for a review of the Australian industry, expressed
disappointment in the decision. The company's ore is lower quality
and costlier to dig up than that of BHP and Rio Tinto, so
Fortescue--the world's fourth-largest producer of the commodity--is
finding it more difficult to weather the sharp downturn in iron-ore
prices.
"This denies the Australian people the opportunity to shine a
light on the iron-ore industry and to understand whether it has
been operating as an open market in which producers act to maximize
the value of the resource for our nation," Mr. Forrest said in a
statement.
"My view is the threat of oversupply, or self-harm by Australia
in a market it dominates, is the biggest factor" behind the
downturn, he said.
BHP Chief Executive Andrew Mackenzie said the company welcomed
the decision. "We thank the Government for its consultation across
the industry," he said.
A representative for Rio Tinto couldn't immediately be reached
for comment.
Earlier this week, Mr. Mackenzie cautioned that a parliamentary
review would send "a terrible signal" to iron-ore buyers in
countries including China and Japan, and could encourage them to
invest more in other resource-rich countries such as Brazil to
diversify their sources of supply.
The Minerals Council of Australia, a lobby group for the mining
industry, also said last week it welcomed a parliamentary inquiry
to help expose the idea that higher Australian production was
chiefly responsible for the dramatic price falls on the global
market.
The iron ore price has collapsed to decade lows in the past year
as swelling supply from mines in Australia's Pilbara region has met
cooling demand from China's steelmakers.
Some smaller Australian producers have been among the most vocal
critics of their larger rivals' strategies. Companies such as
Fortescue are more vulnerable to lower prices because they lack the
scale to keep down production costs.
The price falls have become so pronounced that they are eating
into tax revenue, making it harder for the government to improve
the nation's finances as promised at the last election, while
producers with high cost bases are now threatened.
Opposition leader Bill Shorten said the uncertainty around an
inquiry had damaged investor confidence in Australia.
"There is no doubt the Prime Minister's actions and those of his
Ministers have damaged the industry. This has been a debacle
entirely of the Government's own making," Mr. Shorten said in a
statement.
Sen. Xenophon said he would keep pushing for an inquiry, though
he said the idea had likely been killed by a "shock and ore"
campaign of pressure on lawmakers by big mining companies,
mirroring previous success in overturning a profits tax on resource
companies.
"You've got to ask, given this extraordinary turn of events:
where does the real power lie in this country?" he said in a
statement.
Rhiannon Hoyle, Rob Taylor in Canberra and Rob Stewart in
Melbourne contributed to this article
Write to James Glynn at james.glynn@wsj.com
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