NewBHP Billiton warns against inquiry in iron ore industry by Australia would turn off China

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.