Whether or not you agree with Fortescue chairman Andrew Forrest's call-out to the big iron ore producers to cap production, it looks to have backfired, with the commodity's price falling to its lowest level since a daily tradeable market was established in 2009, thanks to confirmation none of the big producers are doing anything to dam up the flood of iron ore.

While Forrest clearly thought his comments were beneficial, they are now interpreted as an indication of the increasing pressure facing Fortescue after an unsuccessful move a few weeks ago to refinance the company's debt. It attempted to extend the debt profile and reduce its cost. But Forrest experienced a rare knock-back from the US debt markets and his chances of doing an acceptable deal became slimmer as the price of iron ore falls.

No doubt the company will be dusting off its plans to sell equity in individual mines as a means to raise money if the price of iron ore stays at current levels or falls further.

Forrest's remark generated a stiff rebuke from other producers like Rio and Gina Rinehart that there was no chance they would curtail their massive plans to increase production.

The largest financial victim of the 4 per cent slump in the iron ore price is Fortescue's shareholders of which Forrest is the largest. The company's share price fell 3.2 per cent when the market opened on Monday morning.

There are various opinions on Fortescue's costs. Some analysts contend that today's iron ore prices are below Fortescue's cost – that is, it is operating at a cash loss. Based on Fortescue's own figures the mining company is making cash – but only just.

The verdict on last week's outburst at a Hong Kong dinner – at which he encouraged fellow producers BHP Billiton, Rio Tinto and Brazilian Vale to cease flooding the market – is that it was a Forrest thought bubble.

It is probably true that he didn't plan to say it, he certainly didn't think about the legal consequences of promoting cartel behaviour nor foresee that Treasurer Joe Hockey would join the Australian Competition and Consumer Commission in delivering him a slap.

And he would definitely not have anticipated it would have played into a further slump in the iron ore price.

His motivation was to goad the others and highlight the fact there are no winners from flooding the market with iron ore. His comments are supported in theory by the falling profits from BHP and Rio on the back of the plunge the commodity's price.

Even placing a focus on the prospect of a truce has in effect rendered such an outcome more difficult to achieve. Any curb to production growth will now come under the microscope of the competition regulator. ACCC chairman Rod Sims issued a statement last week saying he would look into the comments made by Forrest. A phone conversation on Wednesday between Forrest and Sims appeared not to have allayed the ACCC concerns.

It could only have galvanised the existing large-scale and lower-cost producers to vocalise their view that if they don't increase supply someone else will.

To the extent that there is an avenue for Australian iron ore producers to legally collude on supply if an application is made and approved by the ACCC, there is no appetite from BHP or Rio for such a move.

The only "someone else" in the market apart from BHP, Rio and possibly Gina Rinehart, is Vale.

Thus they are all second guessing each other – involved in a massive exercise in game theory according to Forrest.

The smaller producers in China, Australia and other regions around the world are, for the most part, losing money on each tonne they produce at these price levels. Many have already mothballed mines while others are holding on for as long as possible or subsidising their iron ore production from other operations.

If the aim of the exercise for BHP, Vale and Rio is to increase their market share by forcing others out of the market then it has already met with some level of success. But they are far more busy watching each other than the small players. BHP doesn't compete for capital with BC Iron or Altas Iron, it competes with Rio and to a lesser extent Fortescue.

But according to Australian competition law this represents the ordinary and legal working of any commodities market. When prices are high companies invest in new production, which leads to prices falling – making only the lowest-cost producers able to continue.

Fortescue has itself subscribed to the same model. It ramped up production when prices were low. However, the difference between it and the big boys of the iron ore industry is that it doesn't have the balance sheet – given its increased production was funded through debt.

But make no mistake – while the big producers are busy protecting their own market shares (and their shareholders' interests), Australia's balance sheet suffers as tax revenue falls.