Rio Tinto chief executive Sam Walsh has strongly criticised Fortescue Metals founder Andrew Forrest for his "harebrained" scheme to boost iron ore prices by putting a cap on production.
Mr Walsh says Mr Forrest's idea is absolute nonsense, against free trade and a throwback to the days of tariffs.
But Mr Forrest is standing by his controversial and possibly illegal call for a cap, on the basis that it was not in Australia's or shareholders' interests to over-supply the market and drive down the price of the nation's top export.
Australia's competition watchdog is investigating if his comments constitute an illegal call for a cartel.
Mr Walsh said it was not in the national interest to prop up projects that were losing money and such colluding would breach international law.
"I think the comments were absolute nonsense and I am not sure that Andrew actually sought legal comment beforehand," he said.
"That's not the way to run this great country ...to try to artificially prop it up with some harebrained scheme is just physically not going to work.
"I'm not sure the Chinese customers of Andrew actually appreciate his comments."
The strong comments continue a war of words between Fortescue and the larger and less debt-laden Rio and BHP Billiton, which are better able to handle the current low prices.
Mr Forrest, one of Australia's richest men, has watched his personal wealth sink in the past year through his one-third stake in Fortescue.
Its share price has fallen 60 per cent in that time.
In making his controversial call for a production cap during a business dinner in Shanghai earlier this week, he sought to appeal to the national interest, saying that the supply glut is hurting Australia's coffers.
Western Australian premier Colin Barnett last week said BHP and Rio's current policy was a dumb corporate play.
Fortescue is the world's fourth largest iron ore miner but is struggling to stay profitable at current spot prices of about $US55 a tonne, relative to its production costs and need to service $US9 billion in debt plus interest.
Mr Walsh insisted that Chinese demand for Australian commodities in cars, fridges and other products would still be strong for a long time as it changes to a consumption driven economy.
Mr Forrest said production cuts by the world's iron ore giants could help iron ore prices recover to around $US90 a tonne.
But the Australian Competition and Consumer Commission said any attempt by Australian businesses to encourage competitors to restrict output to boost prices was a matter of grave concern and could be in breach of the law.
Share
