Australia's #1 industrial directory for equipment & suppliers

Growth in iron ore to contribute $600bn to economy over next decade

10 July, 2015

Australia's iron ore industry has capitalised on a decade of unprecedented volume and price growth to create a market position stronger after the commodities boom than it was before.

As a result, the industry is likely to contribute in excess of A$600 billion to the economy over the next decade, more than over the decade from 2005 to 2014.

These findings are contained in a new report by leading consulting firm Port Jackson Partners (PJP) commissioned by the Minerals Council of Australia (MCA). Iron ore: the bigger picture provides an in-depth examination of industry dynamics, the benefits Australia derives from the iron ore industry and the policies needed to sustain this contribution in the years to come.

PJP conclude that the core of Australia's iron ore sector is robust with more than 80 per cent of Australian capacity in the bottom half of the global cost curve. With output having risen from 170 million tonnes in 2000 to more than 650 million tonnes in 2014, the annual level of activity in the iron ore sector from ongoing operations alone is now much greater than even the investment-driven activity over previous years.

The report makes three compelling points in addressing the key question of whether the industry or government policy-makers could have done something differently to ensure Australia would now be in a different, higher priced world.

Firstly, the actions of the Australian iron ore sector are not the only, and not even the major, drivers of iron ore prices.  Iron ore trades in a global commodity market and recent prices falls have not been out of line with trends in other commodity markets.  

Secondly, the actions of the Australian iron ore industry over the past decade have been exactly right from a national interest perspective. Australia's increased market share – from 34 per cent in 2000 to 50 per cent of the seaborne market in 2014 – means the industry can remain a 'robust wealth generation machine' for the nation, even at long-term average prices or below.

Thirdly, history shows that market intervention through government policy action is likely to be ineffective at best and counter-productive at worst.  Across commodity markets, past attempts at controlling price through centralised marketing have failed. And Australia's experimentation with export controls in the 1970s and 1980s saw Japanese investment support Brazilian iron ore capacity instead of Australian.

The report recommends policies remain focussed on productivity growth and cost competitiveness through free and open markets for trade internationally, competitive markets for goods and services supplied in Australia, workplace cultures that support productivity, wise investments in people and infrastructure and stable and competitive tax and royalty arrangements.  

You can download the report here.

Have your say...

We welcome thoughtful comments from readers
Reload characters
Type the characters you see in this box. This helps us prevent automated programs from sending spam.