Iron ore’s value to the Australian economy
The gross value added of Australia’s iron ore industry has consistently exceeded 130 billion Australian dollars since 2017, a significant contribution to the economy that is largely built on exports. Most of the country’s iron ore is mined in Western Australia, which is also home to the tens of thousands of metal ore mining employees involved in this industry. When looking at resource and energy commodity exports from Australia, it’s clear that iron ore dominates. While China was the leading destination for these iron ore exports, Japan and South Korea were the next largest importers respectively.Global companies such as BHP, Rio Tinto, and Fortescue all operate mines in the country. These three mining giants were the leading iron ore mining companies by market cap listed on the ASX. Recently, BHP and Rio Tinto partnered with the country’s biggest steelmaker, BlueScope, to investigate decarbonizing the steelmaking process via an Electric Smelting Furnace (ESF) pilot plant. Developments in this area may lead to lower carbon emissions from the industry.
Is Australia’s iron ore industry as resilient as it seems?
A decade ago, much of the industry was focused on opening new mines, with expenditure on iron ore exploration almost twice as high as today. Iron ore mining companies are investing in their production processes to make them more efficient, allowing them to supply high volumes of ore at lower costs. Priorities have shifted due to stabilizing steel demand; the projected demand for crude steel has been consistent for the past few years.Currently, the Asia-Pacific region is the largest consumer of finished steel products, but China’s recent housing slowdown could reduce this consumption. Although, some industry participants have pointed to growth in other sectors, such as infrastructure, auto manufacturing, and green energy, indicating that iron ore will still be in demand. Nevertheless, the strength of the Australian iron ore industry is closely tied to Asian demand and looks likely to remain that way for the immediate future.
