Australian regulators should probe trading in steelmakers’ shares in the week before the announcement of a carbon-tax plan that gives $300 million ($322 million) in concessions to the industry, say two lawmakers who sat on the committee that helped design the policy.
The biggest jump by OneSteel Ltd. (OST) shares in two years and a 6.2 percent surge by BlueScope Steel Ltd. (BSL) on July 6 should be investigated by the Australian Securities & Investments Commission, said lawmakers Rob Oakeshott and Christine Milne. The price movements may point to leaks in the days before Prime Minister Julia Gillard announced the plan on July 10, they said.
“There appears to be some evidence that there were people who had information from which there was a commercial benefit,” Milne, deputy leader of the Greens party, which holds the balance of power in Australia’s upper house, said in a telephone interview yesterday. “I support calls for an ASIC investigation. I was surprised and frustrated about the amount of information that was leaked from the package in the final week. It was an avalanche.”
The government was so concerned about the sensitivity of the package that Oakeshott, Milne and other members of the advisory committee had to sign secrecy agreements. The report was released in a media lockup in Parliament House in Canberra on Sunday, July 10. Still, details leaked, Oakeshott said.
ASIC Chairman Greg Medcraft declined to comment on the matter when asked at a speaking engagement in Sydney yesterday.
“In the week before the announcement, other parties became involved, and it was in that final week it became increasingly clear leaks were occurring,” Oakeshott, an independent member of parliament who supports Gillard’s minority Labor Party government, said in an interview. “In terms of an investigation, I would fully support that to determine who knew what and why.”
“Every member of the advisory committee was fully aware of the market sensitivity of the information,” he said. “Hundreds of people knew about the details of this policy in the final week and it was impossible the government could keep a lid on it.”
OneSteel and BlueScope shares rose more than 6 percent on July 6, adding about A$310 million to their combined market value. Details of the plan, including the starting price of A$23 per ton for carbon, appeared in newspapers through the week before the official release. The first details of help for the steel industry appeared in the Australian Financial Review on July 8.
‘Level Playing Field’
Steve Ashe, a spokesman for OneSteel, said the company doesn’t comment on its share price or on speculation. BlueScope has a policy of not commenting on market rumors or speculation, said Michael Reay, a spokesman for the company.
“It’s crucial to ensure a level playing field,” said Jason Teh, who helps manage about $3 billion at Investors Mutual Ltd. in Sydney. “Any abnormal price action should be investigated.”
Vas Kolesnikoff, chief executive of the Australian Shareholders’ Association, a 7000-member organization that represents smaller investors, today joined calls for a probe.
“There are obviously grounds here for an investigation,” he told Bloomberg News by telephone today. “Where there is an unusual price movement, there is always a potential that a few people knew price-sensitive information.”
Oakeshott and other advisory committee members were warned about the confidentiality of the carbon plan in a letter from Cabinet Secretary Mark Dreyfus.
“Details of the carbon-price plan were market sensitive,” Dreyfus said in an e-mailed response to questions yesterday. “I felt it appropriate to reinforce the sensitivity and confidentiality of the information before the committee.”
Stocks in OneSteel and BlueScope pared gains through the following week after the Greens party said it hadn’t agreed to the assistance for steelmakers. The government will need the support of the Greens in the Senate to enact the plan.
Under Australia’s carbon reduction plan, the government will provide A$9.2 billion in the form of free carbon permits over three years to assist the biggest-polluting businesses such as aluminum smelters, steelmakers and manufacturers.
BlueScope said in a statement on July 10 it would receive about 60 percent of the A$300 million in steel-industry assistance. The rest would go to OneSteel.
Mark Davis, a spokesman for Climate Change Minister Greg Combet said the government developed the policy over nine months and had made statements about what would be considered in the final package.
“The climate committee and Cabinet discussions involved normal Cabinet confidentiality processes,” Davis said in an e- mailed statement, referring to the government’s most senior policy-making body.
ASIC was not able to comment on specific price movements, spokesman Matthew Abbott said in an e-mail. Market integrity is the regulator’s priority and it’s watchful for examples of potential insider trading or manipulation, he said.
ASIC chief Medcraft vowed last month to “crack down” on unfair disclosures, including media leaks, that cause sudden moves in stock prices. ASIC took over direct supervision of the nation’s financial markets from Australia’s main bourse operator, ASX Ltd. (ASX), last August.
“This is an important and necessary opportunity for regulators to send the appropriate message to all concerned, and thus these instances should be investigated quickly and thoroughly,” said Mark Tinker, global equity portfolio manager who helps manage $50 billion in London for Axa Framlington.
To contact the editor responsible for this story: Nick Gentle at email@example.com.