China Friendship Costs Andrew Forrest $900 Million In A Week

Being a friend of China during a pandemic is proving to be a costly experience for one of Australia’s richest people.

Over the past week, as a dispute over the cause of the deadly coronavirus disease COVID-19 has erupted into a blame game, Andrew Forrest has seen his fortune shrink by close to $900 million.

Perhaps more painfully the self-made billionaire, known for his flag-waving patriotism, has had his loyalty to Australia questioned by media critics.

Forrest’s wealth, estimated by Forbes at $8.8 billion, is based largely on a 30% stake in the iron ore mining company, Fortescue Metals, which sells most of its ore to Chinese steel mills.

Unlike many other commodities, the price of iron ore has not fallen sharply since the global economy slipped towards a deep recession caused by economic lockdowns aimed at minimizing the effects of the virus.

Iron Ore Price Steady Thanks To Chinese Demand

At the latest price of $82 a ton, iron ore is down by a marginal $4/t since the start of 2020 and up $6/t since mid-March, largely because of strong demand from China as it moves to reboot its economy after the COVID-19 lockdown.

But as China has emerged from a sharp economic contraction, it has also been accused of hiding the cause of the disease which some people believe started in a virus research facility in the central Chinese city of Wuhan.

The problem for Forrest is that senior members of the U.S. government, including President Donald Trump, have been demanding greater clarity from China over the disease and how it spread from Wuhan.

The Australian Government has sided with the U.S. in those demands, prompting the Chinese Ambassador to Australia, Cheng Jingye, to threaten a boycott by China of Australian exports.

That threat drew a strong response from the Australian government but it was Forrest who copped the most criticism when he defended China’s alleged role in concealing the possible cause of the virus outbreak.

Even the Australian Prime Minister, Scott Morrison, weighed in, describing Forrest’s comments about the virus possibly originating outside China as a nonsense.

‘Fantasyland’

“I don’t think anybody is in any fantasyland about where it started,” Morrison said. “It started in China.”

But where Forrest dramatically over-stepped the mark was when he invited the Chinese consul-general in the State of Victoria, Long Zhou, to speak at a media conference organized by the Australian Health Minister, Greg Hunt.

Long Zhou, in effect, gate-crashed the Minister’s event at Forrest’s invitation, prompting a critical editorial in the national morning newspaper, The Australian, which was headlined: “Business must not dictate the nation’s foreign policy.”

The effect on the stock market of Forrest championing China, his major customer, has been severe.

Fortescue Shares Down 12%

While most mining companies suffered a price correction last week with leaders such as BHP and Rio Tinto down about 7% from their highs last Thursday, Fortescue Metals fell 12%.

With a holding in Fortescue of roughly 30% of the company’s issued capital Forrest has seen the value of his stake drop by close to $900 million.

Losing the best part of a billion dollars will have hurt Forrest, but the real pain comes from the attacks on his allegiance to Australia which culminated with a prominent radio talk show host, Alan Jones, describing him as a “Beijing propaganda sock puppet.”