(MENAFN- AFP) The head of global miner BHP Billiton on Tuesday warned an inquiry into the iron ore industry in Australia would send "a terrible signal" about the nation's competitiveness and turn off key buyer China.
The government is considering a parliamentary probe amid claims mining giants BHP and Rio Tinto have been flooding the market, driving down prices, to wipe out smaller competitors.
BHP chief executive Andrew Mackenzie said this was "absolutely not" the case and warned an inquiry could backfire on Australia, which earns billions of dollars from the steel-making commodity -- the nation's largest export.
"This is a ridiculous waste of taxpayers' money on providing a basic economics course on supply and demand," he told ABC radio. "It's red tape, pure and simple."
Calls for an inquiry came to a head this week with Andrew Forrest, chief executive of Fortescue Metals, another Australian iron ore producer, spearheading the charge, backed by independent Senator Nick Xenophon.
Forrest alleges BHP and Rio have deliberately flooded the market, leading to smaller mining companies, which have higher production costs, battling to survive the challenging conditions.
Prime Minister Tony Abbott has indicated he is leaning towards an inquiry but Mackenzie said he should seriously consider the signal it would send, with the government potentially being seen as regulating the market.
He added that it would "be an amazing gift to our major competitor Brazil", suggesting an inquiry would drive customers away from Australia.
"It sends a terrible signal to our customers and flies in the face of commitments we've made at the highest levels in places like China, Japan and Korea that they can turn to us for a secure supply at fair prices," he said.
Mackenzie said the Chinese were already serious investors in Brazil.
"And I'm certain when they see some of these things happening they will be only more concerned to increase their investments in Brazil so they can stimulate an alternative and competitive supply to Australia.
"So this inquiry is very bad for Australia's competitiveness," he added.
Rio's head of iron ore Andrew Harding has also denied the company is manipulating the market.
Treasurer Joe Hockey on Tuesday said the government would discuss the call for an inquiry with the Labor opposition and other stakeholders as part of a "carefully thought-through, methodical" process.
The price of ore has dived by 60 percent over the past 12 months to reach a decade-low of US$47.08 per tonne in early April, badly hurting Australian government revenue.
Budget figures last week showed that Australia's forecast tax receipts will be cut by Aus$52 billion (US$41.6 billion) over the four years to 2017-18, largely driven by the plunging iron ore price.
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