Aust regulator probes iron ore cap talk

Andrew Forrest's comments are the latest salvo in a war of words between Fortescue and its rivals over who is to blame for the glut.

Calls by Andrew "Twiggy" Forrest for Australia's biggest iron ore miners to cap production are being investigated by the competition watchdog amid concerns about potential cartel behaviour.

Australian Competition and Consumer Commission chairman Rod Sims is urging the Fortescue Metals chairman to explain his comments, which may have breached the law in relation to cartel conduct.

"The ACCC will be looking closely at Mr Forrest's comments," Sims said.

"Cartel conduct, anti-competitive agreements, price fixing and attempts to bring about collusive arrangements are very serious matters that the ACCC vigilantly detects, disrupts and deters."

Sims added that any attempt by Australian businesses to encourage competitors to restrict output to boost prices was a matter of grave concern.

Such arrangements did not need to be put into effect to be in breach of the law, he said.

Forrest raised alarm bells for the watchdog after telling a business dinner in Shanghai that he would be happy to cap Fortescue's iron ore production at 180 million tonnes a year. He claimed that if Rio, BHP and Brazil's Vale capped production, it could help prices for Australia's biggest export recover to around US$90 a tonne from the current lows of about US$55.

"I'm happy to put that challenge out there: let's cap our production right here and start acting like grown-ups," Forrest said.

His comments are the latest salvo in a war of words between Fortescue and its bigger rivals BHP Billiton and Rio Tinto over who is to blame for the world's iron ore glut, which has pushed prices of the commodity below US$60 a tonne. However, if Fortescue set a cap of 180 million tonnes, it would still have to increase production from its current rate of 164 million tonnes a year into an oversupplied Chinese market.

Rio and BHP bosses last week blamed Fortescue for increasing the glut as they fended off accusations of flooding the market and hurting local producers.

- AAP