Fortescue Metals Group chief executive Nev Power has summed up the mood in the business community when he called for certainty and stability in government.

 

“We need to know what kind of environment we are investing into so that we can have certainty around the long term and the policy environment we see there,” Mr Power said on Monday. He said he wanted less regulation and lower taxes. “You can’t legislate for jobs growth, you can only legislate to create the right environment for businesses to invest and therefore create jobs.”

 

But Mr Power painted an optimistic picture of demand from China even as the traditional period of seasonal weakness in iron ore loomed. Mr Power is confident the iron ore industry will avoid a repeat of last ­September’s price plunge that forced him to slash jobs and costs and move to reduce debt.

 

He said the market conditions in the lead-up to the period of seasonal weakness were different last year when the Fortescue balance sheet came under serious stress after the price of iron ore crashed below $US80 a tonne.

 

At that time, China was transitioning to a new leadership, while stockpiles of iron ore at steel mills and ports were bigger than at present.

 

“I think the continued [Chinese steel] production rate of well over 2 million tonnes per day and averaging ­780 million tonnes per annum over the first six months of the year is a very strong indicator of demand,” he said. “Even if steel inventories and iron ore inventories are slightly elevated ­coming into that period, I still don’t see that there are any conditions for a significant drop for a long period of time.”

 

The spot price of iron ore was trading at just below $US130 a tonne at the end of last week. Demand is seasonally weak during the summer as the hot weather slows construction activity. At this level, Fortescue generates strong cashflow from its operations in Western Australia’s Pilbara region. After last year’s price slump the ­company initiated a formal process to investigate the potential sale of a minority stake in its infrastructure business, The Pilbara Infrastructure. Proceeds from a sale were to be used to pay down its $US12 billion ($13.5 billion) debt load.

 

But with the recovery in the iron ore price this year, the need to sell a ­$3 billion-plus minority stake in the infrastructure unit had become less urgent, he said. Mr Power said Fortescue and its advisers, Macquarie Group and Lazard, continued to ­evaluate interest in the Pilbara infrastructure assets. “We set [the end of September] as an expectation of when we think things might be finalised and that process is continuing,” he said. “It is a relatively complex transaction so there is a lot of work in going through that.

 

“But most importantly . . . it is our lifeline and we want to make sure that anything we do with those assets is done so we can continue to operate them efficiently and we can expand them to meet the needs of the organisation.”