Barnett Points out Flawed Strategy of BHP, Rio

Mineweb reported that the Premier of Western Australia has pointed out that the biggest iron ore companies should put a break on their expansion plans as they are following a flawed strategy by flooding an oversupplied market.

As quoted in the market news,

Iron ore sank to a 10-year low below $50 a metric ton this month as surging low-cost supply from Rio, BHP and Brazil’s Vale SA spurred a glut just as China’s demand faltered. The federal government is contemplating a price as low as $35 in the May 12 budget, the Australian Financial Review said Monday, citing Treasurer Joe Hockey. The slump is hurting government revenues in the top shipper and forcing smaller miners to close, with Atlas Iron Ltd. saying on Friday it’s halting output.

Colin Barnett, the Premier of Western Auatralia, stated:

The signal’s going out to the market that there’s going to be ever-increasing amounts of iron ore available even at lower prices. The market signal is wrong, and I believe the major companies have a flawed strategy. I don’t think it’s good business for them or their shareholders.

Click here for the full Mineweb report