AUSTRALIA’S big iron ore ¬miners are on a path towards “self-destruction” and could leave the country with a case to answer before the World Trade Organ¬isation, the head of North America’s largest iron ore miner has warned.

Lourenco Goncalves, chief executive of US iron ore miner Cliffs Natural Resources, yesterday told the Global Iron Ore and Steel Forecast conference in Perth the surge in iron ore supply from producers such as BHP Billi¬ton, Rio Tinto and Fortescue Metals could send the price of Australia’s most important export to permanently lower levels.

Iron ore prices have more than halved in the past year as surging production swamped cooling demand, although the key iron ore index rebounded slightly yesterday to end a six-day losing streak.

Mr Goncalves said the price of seaborne iron ore shipped by Australian miners could halve again from about $US60 a tonne to as low as $US30 as a result of the major miners’ expansion strategy.

“You call that strategy? I call it self-destruction,” Mr Goncalves said.

On Tuesday, Rio Tinto iron ore chief Andrew Harding and his BHP counterpart, Jimmy Wilson, defended their companies’ roles in the creation of the supply glut, arguing that each tonne of supply they did not deliver would have been filled with lesser-quality ore from elsewhere.

But Mr Goncalves said the ¬actions of the majors would have serious ramifications for Australia. “We are going to have Australia going out of business as a country,” he said.

West Australian Premier Colin Barnett had complained about the falling price of iron ore when it fell towards $US80 a tonne, he noted.

“At $US58, he should be starting to climb the walls. If iron ore continues to deteriorate, the ¬history of Australia as a country will be changed. We need to think about these consequences.”

The apparent effort among Australian miners to drive Chinese producers out of business — aided by the recent Reserve Bank interest rate cut and subsequent falls in the dollar — could catch the eye of the WTO.

“Imagine if it were Russia trying to drive Japanese businesses out of business. It would not be that cool,” he said.

“In a world that’s flat, you’ve got to do to others only what someone else would do to you.”

Since taking the top job at Cleveland-based Cliffs last year in the wake of a bloody board coup, Mr Goncalves has set about changing the miner’s strategic ¬direction. He has moved to exit Cliffs from the seaborne iron ore ¬market, a move that included ¬putting the company’s Kool¬yanobbing iron ore mine in WA up for sale, and has sold, or is ¬selling, Cliff’s coal, chromite and nickel interests.

The changes will leave Cliffs exposed entirely to the domestic US steel market, which is largely quarantined from the volatility in seaborne iron ore.

Rather than drive marginal production out of the market by lifting output — a move Mr Goncalves calculated had cost BHP, Rio and Brazil’s Vale about $US50 billion ($66bn) in earnings before interest, taxes, depreciation and amortisation over the past 13 months — the majors would have been better off buying and shutting down companies such as Fortescue and other smaller producers to stabilise iron ore at higher prices.

“Driving a company out of business does not make the iron ore disappear from the ground. New owners can come and develop the same orebody again,” Mr Goncalves said. “Low prices will not fix the problem (of rival supply) for good, unless we are in for low prices forever.”

Mr Goncalves also said both BHP and Rio had overestimated the likely growth of Chinese steel production, with the two miners forecasting Chinese output to peak at more than 1 billion tonnes in the years ahead.

A speech at the conference by Li Xinchuang, the president of China Metallurgical Industry Planning and Research Institute and the deputy secretary-general of the China Iron and Steel ¬Association, backed Mr Goncalves’ argument that predictions about China steel production were overoptimistic.

Mr Li said China’s annual production had peaked last year at 823 million tonnes, and would fall to 678 million tonnes in 2020 and 567 million tonnes in 2030.

He also noted most of China’s steel mills continued to operate at profit margins of less than 1 per cent, compared with margins of about 34 per cent for the mining giants, and suggested prices could still go lower.

He said he expected the iron ore price to average $US60-$US65 a tonne in coming years.

On a positive note, he said the higher quality of Australian iron ore meant Australia’s market share in China should grow, even as iron ore consumption abated.

Mr Goncalves said the sales process at Koolyanobbing had ¬attracted several inquiries but ¬declined to expand.