Comrade Colin embraces the cartel

From Fairfax:

Colin Barnett said there had been an over-reaction to Mr Forrest’s idea, including by Rio Tinto chief executive Sam Walsh, who labelled it a “harebrained scheme” and “absolute nonsense”.

“I don’t think Andrew Forrest ever used the word cartel and I think the response has been a little bit exaggerated,” the Liberal leader told Radio 6PR on Friday.

“I think the point he’s trying to make is if you flood the market, you hurt yourself, you hurt the smaller companies, you certainly hurt your shareholders, and I think the iron ore industry should be supplying to meet the market.

“That’s not a cartel or predatory pricing or whatever else, but just keeping supply at a reasonably stable level, which allows for natural growth in the market.

“It’s a fine line, I guess, between thinking about how you supply the market as distinct from getting into problems with trade practices law.”

This is really fanciful. All legalities aside, if Andrew Forrest joins with RIO and BHP then the juniors will most certainly die as Roy Hill, Vale, Sino and Anglo come on. Then FMG will still probably die. Even if they all join together the juniors will have to die anyway unless all the big guys immediately cease 200 million tonnes of expansion with largely sunk costs which is absurd.

Comrade Colin is looking to do the same thing that Andrew Forrest is, shift the blame to big iron for his woes for his own purposes.


  1. Reaction has been completely over the top.

    ACCC should concentrate on actual practices and leave fantasy to HBO.

    • Is HBO adapting Ayn Rand now? That is probably too fantastical for HBO, I think Disney should do Atlas Shrugged. John Travolta can do the ‘Fountainhead’ as he showed himself to be adept with giving the source material the respect it deserved when he adapted ‘Battlefield Earth’,

      • You know there are actually 2 movies out based on Ayn Rand’s Atlas shrugged.
        s a 2011 American film adaptation of part of Ayn Rand’s 1957 novel Atlas Shrugged, intended as the first film of a trilogy encompassing the entire book. After various treatments and proposals floundered for nearly 40 years,[4] investor John Aglialoro initiated production in June 2010. The film was directed by Paul Johansson and stars Taylor Schilling as Dagny Taggart and Grant Bowler as Hank Rearden.

      • I found out about the recent one when I read Roger Ebert’s review upon its release. It is meant to be a bad film, regardless of the source material.

        I do like Mr Ebert’s summary of Rand’s philosophy,
        “I’m on board; pull pull up the lifeline.”

        Sadly, that seems to be a very popular position in today’s world.

  2. If I were A head of RIO or BHP id already be going legal against the state and against twiggy for even mentioning such a thing.

    Twiggy a billionaire player in the IO game can not go out into public and suggest “fixing the market” neither should Barnett have a sa.

    A cartel is not for the benefit of the low cost producers. The sooner fmg dies off like a spent leaf the better…

  3. moderate mouse

    Given it was Comrade Colin’s idea to start with this should come as no surprise….

  4. Guys do you remember??
    I was young in those days, I actually bought shares in Bondy’s airship company, (the fool I was) WW

    WA Inc was a political scandal in Western Australia.
    In the 1980s, the state government, which was led for much of the period by premier Brian Burke, engaged in business dealings with several prominent businessmen, including Alan Bond, Laurie Connell, Dallas Dempster, John Roberts, and Warren Anderson.
    These dealings resulted in a loss of public money, estimated at a minimum of $600 million and the insolvency of several large corporations.

    Bond and Connell were major contributors to the party in government, the Australian Labor Party and its remarkable fundraising structure, the John Curtin Foundation.
    A royal commission (the Royal Commission into Commercial Activities of Government and Other Matters) was established in 1990 by Labor premier Carmen Lawrence to examine the dealings.

    Connell alleged [in evidence to the Commission] that Hawke dropped a proposed gold tax after Connell and various Perth high-flyers donated $250,000 each to Labor during an infamous lunch in Brian Burke’s office in 1987—a claim the former PM vigorously denied.

    Burke’s loyalty to those who had donated their efforts (and money) to Labor was no less fervent.

    Taking the John Curtin Foundation axiom to the next level, Burke created the West Australian Development Corporation and installed fellow Catholic John Horgan on $800,000 a year, an extraordinary figure for a public servant not only then but now.

    • WW.
      If we are going to toast the Airship, WA Inc and the memories you have to find a can of Swan Premium Lager and do it in style. Remember, “they said you’d never make it but you finally came…”

      • Pfft no longer made in WA ( made in SA now )
        One of the many reasons why I believe the mining unwind is going to bite hard.

  5. Has anyone done a fuller explanation of why this cartel is a silly idea?
    The comments on smh were about 75% for the proposition as if it were a ‘no-brainer’ so I think some quality economics education is called for.

  6. Sam Walsh has a good memory. In the 80s when the Japanese iron ore consumption levelled, a Hamaersley (Rio) executive went slightly further than thinking about a supply cartel that included BHP. The Japanese were quick to reprimand by reducing uptake to contractual minimum from Hamersley and taking more from BHP.

    During this period Hamersley literally stockpiled a mounting of iron ore at Dampier.

    As it turned out BHP suffered production problems and Hamersley made a fortune from its mountain taking up the slack.

    With the increased diversity of iron ore supply and excess capacity now, FMG could be swiftly dealt with by their Chinese customers.

    Just a few years ago the iron ore producers were making a killing out of supply shortages. The market has changed. The fittest will survive.