Hockey must block any Fortescue, China deal

The iron ore end game is upon us. The AFR is reporting that China inc is preparing to move on Fortescue Metals Group:

Chinese-linked companies have applied to the Foreign Investment Review Board seeking permission for an investment involving Fortescue Metals Group.

Australia’s third-largest iron ore producer has held discussions with China’s largest steel producer, Baosteel, and China’s largest conglomerate, CITIC, about a recapitalision to shore up its balance sheet.

It is unclear if the applications to FIRB are from CITIC or Baosteel but sources said there is interest in Fortescue from one or more companies which are Chinese or part-Chinese owned.

Matthew Stevens speculates:

The prospect most often posited is that the Third Force would invite new Chinese partners at an asset level and that this would most likely then be secured by ownership of the head stock to a level that might command a seat at the board.

…Now, the only way to introduce a serious new investor to Fortescue without dilution of Forrest’s 30 per cent would be for the stake to be delivered in a neat parcel and the most obvious mechanic for that to happen would be for Forrest to provide that equity.

…China Inc, on the other hand, has every reason to chase the opportunity of a deeper engagement with Fortescue, despite the Third Force’s obvious short-term issues. The important thing to understand about Fortescue is that it is now firmly baked into the Chinese system. It does what India doesn’t want to do. Fortescue exports big volumes of sub-premium material that is essential as a blending material for both the 66 per cent concentrates China produces domestically and the 65 per cent-plus material it plans to increasingly acquire from Brazil.

Add the following, also from the AFR:

China will use its growing relationship with Brazil to pressure Australia into running a more independent foreign policy, according to analysts and academics, as Beijing seeks to use its economic muscle for strategic influence.

…”If Australia gets closer to the United States we will see China increase its purchases from Brazil, while reducing its trade with Australia,” said Wu Xinbo, Dean of the Institute of International Studies at Fudan University.

“The alliance between Australia and the US is a major constraint on the relationship between China and Australia.”

Whatever the deal that is before the FIRB, if it boosts Chinese interests in FMG it must be blocked. End of discussion.

As the customer for 70% of global seaborne iron ore production, China has clear priorities and incentives to privilege a low iron ore price over profit generation. To allow that customer to take a big enough stake in the emerging marginal cost producer to be influential in strategy is to risk, and let’s face it deliver,  a much lower long term iron ore price.

The maths is simple. If commodity markets are left alone over the long term, the lowest marginal cost of production sets the price. However, if marginal producers are kept alive by state-sponsored life support then the oversupply can never clear and the price sink below the lowest marginal cost.

It is quite conceivable that a Chinese controlled FMG could force RIO and BHP to cut much cheaper and more profitable tonnages in the future, even as it runs loss after loss.

This is a market structure issue of the highest national interest priority. At one third of exports and three quarters (with coking coal) of export income growth since 2003, iron ore is the key to the Australian economy. If the Pilbara cartel of BHP and RIO is structurally undermined so is Australia’s sovereignty, economic prospects and strategic outlook.

Sadly, Joe Hockey and Tony Abbott appear to understand none of this. Their flirtation with Twiggy Forrest’s iron ore inquiry surely suggests that if nothing else.

Joe Hockey has two choices:

  • block any deal outright, or
  • get on the blower to BHP and RIO and tell them that if they make a hostile counter bid for FMG then they will get FIRB approval.

This is not some parlour game of government versus markets. This is a vital, palpable, visceral national interest decision that will affect the prosperity, values and alliances of Australia for decades.

We are being played.

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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Comments

  1. Approve recapitalisation from China = “save” a few thousand FMG jobs. Win political points.

    Consider this a done deal.

    • Brett Edgerton

      Well said H&H … As Peachy says, not a lot of confidence in our “leadership” to think beyond the next few months, so…

      There is one more option… block the deal and make it clear that no further (effective) sell off of iron ore assets to China will occur… If FMG goes bust, as it probably will, then as Mr Jones said, the two majors can pick over the carcus and strengthen their positions… Why should Twiggy’s millions be bailed out at all ??? Seems like shut up money, otherwise… BTW, I have doubts he will give much to charity at all if he gets down to his last mill or two…

      • Brett Edgerton

        I might just be pissing in the wind here, but I want to pick up on the final sentence of my comment above – Twiggy’s “philanthropy”… As someone who takes giving and altruism seriously, this is the aspect of Mr Forest’s strategy that I take greatest issue with…

        I have to admit that I placed that sentence there to make a point, and did expect someone to pick it up – perhaps with a play the ball not the man comment… But, obviously when it comes to FMG/Forest, the man is the ball and vice versa… And that’s never been more apparent than over the last few weeks…

        I feel that Forest has tried to paint himself not just as a great Australian but a great human being… I have heard him at least once over recent weeks raise his philanthropy as an issue – “why would I give millions away over the last few years if…”

        To most readers here, his dominant role in sinking the RSPT showed that he certainly should not be seen as having Australia or everyday Australians’ best interest at heart, but rather his own…

        And I can’t help but think that his philanthropy over the last few years has been about the image that he considers advantageous to portray which he can then leverage in the political and public spheres to advance his own interests…

        A comment that my father made to me when I was a young boy that stuck with me was that giving is relative to what you have to give… through my life I have seen this in action, working or visiting in a professional capacity poor countries where it was consistently shown that the less people have, the more (as a proportion of what they have) they frequently seek to give… It reminds me of the prelude into a Roger Waters performance in Brisbane a few years ago when he told of a family that came to his rescue when stranded while traveling through the middle east (in the area of Iraq) in the 70s… How enormously touched and grateful he felt when he sat at the table eating dinner, realising that the old couple were not eating because, in fact, they had given him their only food for that night… When he tried to insist that they eat, too, his pleas were futile because for them it was a great honour to give him that gift… And the same again while they insisted he sleep in their bed while they slept on the floor… His lyrics asked what had happened to those incredibly generous and caring human beings through the decades of war…

        I have never said this to anybody, but over the last 10 years or so my family has given (net of tax refund) between 10% and 20% annually of our incremental savings to charities including World Vision (child sponsorship and drinking water projects in Africa), UNHCR, Medicines san Frontier, Canteen, Abused Child Trust, Cambodian Children’s Trust and our children’s local state school (including when were saving to buy our own home)… I also spent a lot of time and effort in public service by participating in the housing affordability debate, and specifically attempting to help Australians consider whether Government policy was sponsoring the restructuring of our homes as places to live and raise families to instead be financial instruments on which to gamble…

        Relative to what we have to give, sure we could give more (and sometimes I feel guilty we don’t), but I believe it’s a reasonable effort… I neither want a medal or even a pat on the back for it… In my view, giving to those less fortunate that oneself and to community is the right thing to do…

        I am offended by Forest painting himself as a philanthropist on one hand, but on the other hand wanting all Australians to in effect subsidise his millions…

        True giving is done expecting nothing in return… It is altruism at its rawest… And no genuine philanthropist would later turn around and ask millions of people less fortunate than themselves to support them to maintain their lifestyle…

      • BE,
        Re your take on charity, it’s something I’ve always found amusing when the press talk about millionaire/billionaires giving away their money, like what impact does it have on their life? None, absolutely zilch. Gates and others shouldn’t expect to be lauded for what they give. On Gates, at least he realised at a young enough age that he could achieved a lot of good with his money.

      • Game play in progress. Zero chance of approval. While Joe fumbles around the deal will be done with BHP and/or Rio. The Chinese are not stupid. With Vale as their back stop they don’t want a mine, they want their money.

    • That’s about it in one.

      Expecting our gov and pollies to exhibit so kind of strategic understanding is over estimating there capabilities and understanding of what’s happening.

  2. Tassie TomMEMBER

    Good article – this is a real concern.

    Does the ACCC have any problem with big competitors (RIO, BHP) buying a little competitor (FMG) essentially to shut them down? Although it is the logical solution, it seems a little anti-competitive.

  3. Good stuff… but political dynamite. The truth is the FIRB would not knock back a producer who is going bankrupt anyway. They could take the debt (which is outside FIRB’s mandate) and they would control the equity by proxy anyway… once they wipe out the equity holders, which will inevitably happen. The Chinese could convert the debt to equity (which would need FIRB approval), or simply just bankrupt it, and continue to produce in a vain attempt to pay back the original debt pile with interest (which the entity would never do of course).

    Its a good move – and there is naught we can realistically do about it. Well played…

    And well spotted H&H. Good reasoning.

      • But he won’t, it would be political suicide. Forrest is very persuasive on an electorate that is nervous as many are… economics aside, who cares about that!!!. And lets say he did, Shorten would be on this band-wagon in a flash. Labour are desperate to get a few seats in WA – and this would be mana from heaven…

        IMHO, the deal is done – but it will probably be an debt swap, wink, wink, no FIRB approval needed…

      • Ronin8317MEMBER

        I disagree about the political suicide part. Knocking back a foreign take over is always politically popular. BHP and RIO will also be lobbying very hard against this. The only reason for Joe Hokcye to approve this is ‘being stupid’, and sticking to the ‘market is always right’ principle when the other side is cheating.

      • Exactly. With a little help, the peeps can see that Twiggy is taking them for a ride. The real calculus is are they prepared to wear the short term economic fallout for long term gain.

      • Even StevenMEMBER

        I disagree, Researchtime. I think even the average punter would understand that allowing a Chinese takeover of the marginal producer is not good. Most likely is option (b) of H&H – which is that BHP and/or RIO will be encouraged to take it over. China Inc will be blocked outright from making a bid on national interest grounds.

      • St JacquesMEMBER

        It’s game over for the Libs in WA as the state plunges into the abyss. Remember the WA treasurer last year, when he said nobody could have seen this coming? MB, most of its readers and many others certainly did. Would you vote for “leadership” like that?

      • drsmithyMEMBER

        The only reason for Joe Hokcye to approve this is ‘being stupid’, and sticking to the ‘market is always right’ principle when the other side is cheating.

        So the story of the last few decades then ?

      • Forrest is very persuasive on an electorate that is nervous

        Twiggy never persuaded me of anything. He has far more influence on politicians than he does on the general public who generally see him as a wanker.

      • Even Steven,
        The av joe wouldn’t know what a marginal producer was!
        Drsmithy, hahahaha

        Lorax, Not in WA, knock him and you’ll get a mouth full.

      • Yep Dennis.
        If you’re not talking him up as the messiah over there, you’re a freak – Most Unaustralian!

      • ofcourse he will block any attempt after recent media panic

        I kept saying Australian resources is being given away at the expense of tax payers, let me just repeat it once
        more

        the australian resources is being given away at the expense of the australian tax payers

        its not only iron ore, it every bloody dunny whatever colour or smell.

        but hey, some coys are really cheap so keep going, oil is going lower
        and so is the AUD

  4. We are most certainly being played and have been ever since we got this crazy idea that one of our major resources could be managed by reference to ‘free market’ principles instead of the national interest.

    It doesn’t really matter which mining companies we employ to dig up our dirt they are just contractors.

    It doesn’t matter if they come from London, America, South Africa or even China.

    What matters is how much they are allowed to dig up and export and how they pay for the right to do so.

    And when you think about it in those terms the answer is straightforward. National export volume caps with the miners bidding for volumes within those caps.

    As that Brazilian article I linked to last week made clear, China manages what resources it will allow into the international market all the time.

    Australia has a simple choice be ‘free market’ fanatics and sell at OUR marginal cost of production or be a smart manager of its national resources and ensure that we never compete against ourselves on the world market.

    • Mate calm down. None of what you write above makes any sense… there is no free market anywhere except commodities! Its just we are too small to do anything about it! So we play by others rules – who cares. Its the PLAY part that is key… study game theory. If you are in weaker position, you have to play that part – and your actions dictated by others. It has always been so.

      Its just a game… Shorten wants to be much closer to China and less close to the US (but still have the US as primacy). As much as Abbott dislikes Obama – he is the opposite. The reality is you cannot choose one and have the other. Its all about balance, and how you want to play the game…

      Therefore, as much as this may hurt BHP and Rio, we will not refuse this request if China insists. This is how the game is played. We will inevitably try and get some other pay-off. Why do you think China insisted on immigration concessions for its citizens in a FTA???? They wanted it – we got concessions (hopefully).

    • Strange… RT’s first post was actually pretty good.
      This is all gibberish tho.
      Maybe you two should simply stop talking to each other.

      • Just because I say something is so… doesn’t mean I agree with it. Just stating the facts as I see them. You have to strip what you what want to believe and see happen, for the real politick. This is life… we in Australian don’t make the really big decisions. We try to do our best – which if I am honest, is pretty poor since Howard.

        Ask yourself this question, why haven’t we seen the detail of the FTA with China? Why is it state secret? Surely if we had the detail businesses would use it – they cannot at present, because they don’t know what it contains either. FTA’s are not a democratic instruments, they don’t go to parliaments to get ratified. In that respect, we are becoming a bit like the EU… countries and democracies don’t really matter anymore. Big decisions are made elsewhere – and only a fool would think otherwise.

      • Very good point RT RE FTA. What does it allow Chinese companies to do and what recourse does the Government really have. Put another, did the brain trust in Canberra sign away our Sovereignty to China and is now trying to balance it with another failed agreement with Washington?????

        Tin Hat Time

  5. The Chinese already have runs on the board with their housing and agricultural investments, they are baked in as Stevens highlights. They also have major investments as JV partners with many iron ore and coal partners, this deal with Fortescue was always going to occur, just sit back and watch. Better still go long the shares, there has to be at least a dollar in it.
    The Chinese have a very big hand to play here and we have given them the best cards. WW

    • Brett Edgerton

      They are also strongly entrenched in gas…

      As I said a few weeks back, even though I do not agree with their political system, they have a major advantage in that they can genuinely plan over the long term, while we are stuck with a bunch of flip floppers who are more concerned about setting up for their post-political (cashcow) careers – many as resources consultants…

      Agree on fmg… when I set my shorts on the majors back a few months I bought some fmg calls as “insurance” – realising Twiggy would swing hard going down and was likely to pull a rabbit… though could not resist taking profit when they reached 2.60…

      • Better than me… I have this incredible knack of losing money when I trade! Even if I have the story correct. It must be some genetic abnormality…

      • Brett Edgerton

        RT, my first go at trading (or more accurately, taking much shorter term positions than I am used to) – I am putting it down to beginners luck – but, as I intimated, of course it was not the correct decision if FMG equity hops up and off… When it came down to it, I was happy to be “naked” shorting the IO majors…

      • Josh MoorreesMEMBER

        Don’t worry RT I have the same skill. I think I could profit from it by publishing my trades and having people trade against me for a cut of the profits!

  6. Denis413MEMBER

    Hockey will allow the deal (if there is one) to go through on the basis of free markets and the sugar hit to the budget. The “irony” is the new company will not be run on free market principles (ie to make a profit). This will only “known” after the event.

    On the other hand, they did block the GrainCorp takeover, so there is hope…

    • Agriculture is different than mining… although in saying that, the Chinese appear to be going in big into the Ord River region, especially with the new dam expansion, and I have no doubt that they planning other big agricultural projects in other parts of the North also. It a shame we don’t have that vision too… that we have to let others take the lead. Especially as our capital markets are now a lot larger and more sophisticated than they were even ten years ago!

      For the Chinese – its the new gold rush up north…

  7. reusachtigeMEMBER

    This post is rashist! It is only a matter of time before Chinamen dominate our population anyway and then we shall have far more Chinamen homeland influence. They clearly have mastered the best and most perfect political, economic and social system but we are too dumb and brainwashed to see this. And they make great property investors too! I would surely prefer more Yum Cha joints over pizza houses any day. Bring it on! I for one welcome our far more superior intelligent overlords!!

    • That’s why China has been allowing their officials to smuggle money out of the country and establish new homes in Australia. They need someone local to run the country and businesses they buy for the PRoC.

    • Brett Edgerton

      Yes, the political system, and especially the value attached to human life, is a concern…

      For me, I like balance – give me pizza Friday and Yum Cha Saturday… maybe even a BBQ steak Sunday… Sri Lankan curry leftovers Monday, and some Pad Ke Maow the next…

      And perhaps a visit to a Buddhist temple somewhere amongst that…

      But Italian food definitely my favourite… that’s why I am looking at buying a small apartment in Italy – funny how cheap homes elsewhere look when you have been looking through the hazy thin spheres of liquid enclosing air floating in front of our Australian realestate pages… It’s not a bad backup plan for the future your tongue in cheek points towards…

  8. Well played. This will be of several years in the making.

    Strategy number 4 perhaps?

    Wait at leisure while the enemy labours

    It is an advantage to choose the time and place for battle. In this way you know when and where the battle will take place, while your enemy does not. Encourage your enemy to expend his energy in futile quests while you conserve your strength. When he is exhausted and confused, you attack with energy and purpose. The idea is to have your troops well-prepared for battle, in the same time that the enemy is rushing to fight against you. This will give your troops a huge advantage in the upcoming battle, of which you will get to select the time and place.

    • reusachtigeMEMBER

      They truly are the masters and I pity anyone who will try to fight against them. Embrace them and have them breed out our weaknesses!

      • Yes, we will always lose. Look at how eager we are to sell off our housing to foreigners but we are just impoverishing the next generations.

        Strategy number 16: Tossing out a brick to get a jade gem

        Bait someone by making him believe he gains something or just make him react to it (toss out a brick) and obtain something valuable from him in return (get a jade gem).

        We are chasing the bricks that are tossed to us.

  9. I thought the robots were taking over. Where are those blasted robots?

    The Chinese are famous for making 1000-2000-year-plans, whereas the west, such as the US, have been easily defeated in 50-80 years, and it only took twelve years or so to get us.

  10. The game is over.

    So much of Australia is already sold, what’s it matter if IO is gone as well. We’re fucked. 2.5 times the size of Victoria of prime agricultural land, 86% of mining, 80% of ASX companies, who knows how much realestate.

    Keating, Hawke, Rudd, Abbott, Howard have destroyed us.

    What happens next to our own kids country, is we’ll double population with mainly Chinese and they’ll vote to open our borders to China. We should hang our heads in shame for what we’ve done to our own kids. We are a fucking disgrace and truly deserve to be conquered in this way.

    • In play already, not just here but in other countries too, especially Africa.

      Stratgey number 29: Make the host and the guest exchange roles

      Usurp leadership in a situation where you are normally subordinate. Infiltrate your target. Initially, pretend to be a guest to be accepted, but develop from inside and become the owner later.

    • +1 rich
      Everything turned to shit here when the green and gold made in Australia kangaroo tag went the way of the dodo. No patriotism to be found in this country, just selfishness and greed. Can’t wait for a recession to whack some humanity back into our citizens.

  11. moderate mouse

    “Whatever the deal that is before the FIRB, if it boosts Chinese interests in FMG it must be blocked. End of discussion.”

    So you’re advocating a feathered bed of protection from competition for BHP and RIO, one of whom is effectively a British multinational? What a crock. Let the market work. Let the market work. Let the market work. All the muppets who lined up to diss Twiggy’s call for an enquiry last week by smugly saying “Let the market work” now have a bit of a credibility problem don’t they. I wonder what Kockhead Kohler will write about this after his anti-enquiry effort titled “Iron Ore: Squawking versus Capitalism”. Let the real squawking begin. LOLOLOLOLOL……muppets.

    • Exactly. The market is working. Australia was always going to lose, and is about to lose everything.

      All politicians should be stripped of their wealth as this unfolds.

    • Ronin8317MEMBER

      For Australia’s national interest, FMG needs to die. Otherwise the oversupply will bring the price down for everyone, and we’ll be selling our iron ore at a bargain. Iron ore is not a renewable resource. Once it’s gone, it’s gone, so it’s in our national interest to hold on to them.

      This is not different from allowing supermarket buying up farms. Because pretty soon, the supermarkets will own every single farm in Australia. We don’t allow vertical integration for very good reason.

      • moderate mouse

        Correction – for the Houses and Holes economy to survive, FMG needs to die. I find it deeply ironic that Mr HnH – who established this blog to critique the absurdity of such an economy and agitate for change – now appears to have morphed into a chief defender of the status quo and is openly calling for restrictions on competition within the IO market to protect BHP and RIO. Given BHP is a British company, I can’t quite wrap my head around it. Perhaps it’s more acceptable to be raped and pillaged by the Brits than the Chinese. Who knows.

      • Pretty sure RIO is a British company, they started off mining gold in Spain after all…

      • “Given BHP is a British company, I can’t quite wrap my head around it. Perhaps it’s more acceptable to be raped and pillaged by the Brits than the Chinese.”

        Or just perhaps it’s only the Chinese that have a massive interest in forcing the IO price lower than the marginal cost of production because they are “the customer for 70% of global seaborne iron ore production”?

        I’m not a commodities expert by any means but I can clearly see the difference of interests between a British-owned company and a Chinese one in IO.

    • @MM — “So you’re advocating a feathered bed of protection from competition for BHP and RIO, one of whom is effectively a British multinational? What a crock.” +100

      Well said – They also pay FA tax for the Resources they strip yet wield such power that the Govt shuts down any thought of an enquiry ! That is the scandal .

  12. Well colour me surprised, China Inc has a strategic interest in IO whocudaknowedit

    • Exactly. I wrote a response to the post yesterday stating the IO game was over, on second thoughts, didn’t publish. Suffice to say China retains immense interest in iron ore – supporting Vale (in a spot of bother) vital to ensuring diversity of supply, as are reports of price support to some struggling miners. BHP and Rio are the most cost efficient producers in the world and as such represent … power (not a pun).

      This also says a lot about the long term interest in and demand for seaborne iron ore. China has relocated many major mills to coastal regions to take advantage of geographic conditions in regard to emissions and proximity to port ore. CISA maintains 80% reliance on seaborne by 2020. China steel whilst elements facing difficult conditions, exports continue to find markets even in face of growing protections from countries with domestic steel sectors – end of day price wins out. China does not intend to give up role as steel producer to the world easily. Infrastructure proposals around the region designed to facilitate growth and augment Chinese industrial production – the long view and deep pockets.

      No comment on rumours around FMG.

      • As far as I’m concerned REAL change cant happen in Australia until the next generation (our children) gets totally @#$%ed over by us. Only when absolutely everything of intrinsic value within Australia has been sold off to foreigners or usurped by foreign powers, will the local population ( our clueless offspring) be free to fully develop their human potential (shame about the education they got) Maybe some of the smarter ones will be able to find jobs working for our new masters. As for the rest they’ll be about as useful as another boat load of Myramar refugees (as in wtf do you do with them).
        Still, all in all couldn’t happen to a nicer bunch of specufestors!

  13. Where’s that idiot Lorax telling us not to be racist?

    The left have been played like the morons they are.

    • Lorax is snuggled up to his favorite camphor laurel down Byron Bay way. He and R2M will be meditating this through.WW

      • The sooner the left realise Labor and Green are the problem and not the answer the better.

        They’ve stood by and watched Australia sell pretty much everything and populate that eventually destroys everything they stand for. Geniuses.

      • Just watched that. How are Labor going to do that while they’re in opposition for a decade?

        Remember they were kicked out because they don’t have a brain among the lot of them. They lost control of our borders and implemented a number of hair brained schemes that shows the electorate they can never be trusted again. I’d be surprised if the party can ever recover.

        I well remember they were copping a barrage and then announced the topboxes. Seriously, they are that clueless and deceitful, they should be in jail. Labor, along with the Greens have destroyed Australia.

        If Labor wanted to do something about housing, why not foreign investment, population growth, opening up more land? Labor and Greens have snookered themselves, with their idiotic support of everything that avoids them being seen as racist. They’re killing us. As a result we’ll have LNP that will finish their plan to transfer all our wealth to corporations. Our wages and work conditions will plummet and our borders will be opened to wealthy migrants that entirely out-compete us in everything.

        Is that what Labor and Greens voters wanted? Fucking idiots.

        P.S. I have never voted for any of the three parties. I vote for whoever stands out that will upset the status quo. If we all did that we’d get change, but instead we get blind following of Labor and Greens which is exactly what I’ve been saying and often get criticised for it. Recently by you Lorax.

    • Well you just keep voting for real estate agents like Joe Hockey then, because that’s clearly the better option.

      • I have never voted for any of the three parties. I vote for whoever stands out that will upset the status quo. If we all did that we’d get change, but instead we get blind following of Labor and Greens which is exactly what I’ve been saying and often get criticised for it. Recently by you Lorax.

        An LNP exist in every country, but thrive in Australia because of the ridiculous strategies and policies of Labor and Green. More so, the blind following of both by an unbelievably naive electorate.

  14. “Fortescue exports big volumes of sub-premium material that is essential as a blending material for both the 66 per cent concentrates China produces domestically and the 65 per cent-plus material it plans to increasingly acquire from Brazil”.

    I don’t know what this fellow Matthew Stevens is smoking, but FMG ‘s low quality ore is NOT ESSENTIAL for anyone. What a joke! If FMG shut down for good tomorrow, better, less polluting ore would immediately displace their crap, and the net market effect would be short lived.

    • What you say is true technically – but thats not the point is it???? This all about the politick.

      • No mate – its not essential… processing low grade material is more costly. Realistically, you actually don’t need any lower grade material at all to produce pig iron. Its all about cost of supply…

      • Please be so good as to enlighten me as to why FMG’s ore, in particular, is ESSENTIAL to anyone’s blend, and cannot be replaced by many other ores. If possible, cite (even) ONE MILL which is in that position.

      • One can only assume that the FMG ore is essential because there is no one in China who can do a mass balance. Otherwise they’d be able to prepare a feed with a sufficiently similar composition from other ingredients.
        You’d really think in a nation of 1.4 billion, someone would have passed first year Chem/Met Eng.

  15. Remember what Laurie Oakes wrote over the weekend?

    “several foreign investment applications that would potentially affect a number of mining companies were lodged with the Foreign Investment Review Board during the week and quickly hit Hockey’s desk. They came out of left field and were seen by the Treasurer and the PM as a game-changer.”

    Chances of Joe blocking a “game-changer”? I wouldn’t count on it.

    • Hopefully the rotund one has been offered a wink job in the PRoC after his stint as 2nd worst treasurer (to Costello) too.

  16. Time will tell if Labor will ‘sweep’ the next election in WA st.jacques but I wouldn’t be putting money on it.

  17. bolstroodMEMBER

    @rich42
    Not only the Left, the Centre & Right are gone as well. Australia’s goes full Monty.

    • Agree. I prefer to attack the left though because they consider they’ve taken the high moral ground that ends up destroying their cause. They’re idiots.

      The conservatives are just doing their thing, transferring wealth to their favourite people with zero regard for anyone’s future but their own.

      So it’s the left being played and right getting their way by conning the left. So dumb it’s astounding to watch.

  18. Denis413MEMBER

    What’s from stopping BHP/RIO to lodge a counter offer. Spending a couple of billion in blocking stakes would easily pay off in the long run. FMG may end up back over $5 haha.

  19. It’s uncanny how these potentially positive share price sensitive announcements come out when Forest is in trouble. Once a stockbroker always a stockbroker.

    • God, you are on to it. In my call this is nothing more than a pump and dump. If you buy in, be careful ,WW

      • There are worse things than buying FMG for $2.40 or whatever today.

        For example, buying FMG for nearly $5 July last year.

  20. They don’t need to take control. A few billion injected reduces the debt load and they produce on their merry way.

    Short RIO

      • For what purpose?

        Every dairy producing nation in the world has doubled the size of its herd (including China itself) to make formula for Chinese babies, whose numbers, in turn, have nearly halved over the last ttwo generations with no bottom in sight.

  21. Forrest GumpMEMBER

    Consider the issue of Royalties which is based on the sale price. Without the Chinese, FMG and the other juniors will lose market share and possibly go under. Once that happens, RIO & BHP will scoop up the spoils of market share and restrict supply pushing prices up and raising Royalties.

    If hockey approves for Chinese interests in FMG, then the Chinese will drive prices down long term, killing off a future return to reasonable Royalties. In the end, WA and the tax payer will lose.

  22. RT:- In strict context of the said article, you must blend high -grade ore with lower- grade in order to make certain types of steel products. If you do not blend the high grade ore, the metal will become brittle and will snap if you try and bend it.
    Of course this process is not used to manufacture all steel products.
    If you still don’t believe, go and talk with someone who actually knows the process.

    • This explanation is nonsense. Blending of the IO fines (which comprise the largest fraction of the shipped IO) is important to the preparation of the sinter feed. Low-grade IO has fluxing components which bind the sinter and contribute to blast furnace slag chemistry.

    • Again – no mate, not so… and don’t mistake me for a fool that just fell out of the sky!

  23. I can’t see a Rio or BHP takeover solving the awkward choices. In the days of the io jv talk, there was real danger of falling foul of the competition authorities in Europe and China which ultimately torpedoed the deal. I can’t see that much has changed from there.