Australian Iron Ore Mining Industry Review

Australian Iron Ore Mining Industry Review

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Iron ore is Australia’s highest valued and most successful commodity export (see Figure 1). Throughout the 1990s and early 2000s, this mining industry played a key role in both Australia’s and the global economy. The change in the industry was brought about, particularly, by the many operations and movements resulting from globalisation that pushed Australia’s exports further than they had ever been. In 2007, “Australia produced around 16% of the world's iron ore and was ranked third behind China (32%) and Brazil (19%)” (Minerals Council of Australia, 2008). Although Australia is not the largest producer, it is currently the largest exporter of iron ore in the world (Australian Minerals Industry, 2008).

In 1997, Australia produced 158 million tonnes of iron ore. However, in 2007, this figure had more than doubled with a total of 320 million tonnes (U.S. Geological Survey, 2008). Such a significant change is partly attributed to the continuous expansion and diversification of the industry’s two key players, Rio Tinto Group and BHP Billiton, into the Pilbara region of northwestern Australia. Other sensitivities include environmental and social demands, technological advancements, and research and development amongst others. It must be noted that each of these factors can be drawn back to a single title that is a major influence on industries worldwide: globalisation. ‘Figure 2’ shows the production levels of iron ore over the 2006-07 period, and its export value compared to other mined minerals.

The driving forces of globalisation have a direct impact on the success of the iron ore mining industry in Australia in terms of the national and global economies. BHP Billiton and Rio Tinto Group, both as Transnational Corporations (TNCs), have further increased industry sales and exports, and reduced the costs of production by utilising economies of scale. Mine expansion and the opening of new mines in the iron-rich areas of Queensland, New South Wales and Victoria have resulted in great benefits for the Australian economy and rapid national growth in the global economy.

China, as the world’s largest importer of Australian iron ore, is considered one of the greatest influences on the success of the industry. If China were to reduce its purchases of Australian iron ore and rely more on its own sources and that of countries such as Brazil, India or Russia, Australia’s growth in the global economy would lessen and the Australian economy would be disrupted as a result of unexpected sales issues. “Growth in the Chinese economy and its demand for mineral resources, particularly base metals, iron ore and coal continue to play an important role in the outlook for exploration in Australia.

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” (McKay, 2008)

Technology, communications in particular, has also had a strong influence on the continued success of the iron ore mining industry in Australia. With the steady introduction of new communication technologies and advancements in transport and information processing, BHP Billiton and Rio Tinto are able to make exceptional use of global communication as TNCs, and further increase their exports into the global marketplace. These technological advancements are allowing not only the TNCs to develop and enhance their operations, but also the world economy itself, which is constantly utilising technology as a way of interlinking each country and creating a ‘global village’.
For several industries, including mining, the environment has had a significant influence on the development and global recognition of TNCs and the industries they support. In the case of iron ore mining in Australia, if the condition of the environment rapidly decreased and the levels of iron ore in the Earth’s crust were diminished, it is clear that the iron ore mining industry would also struggle to find natural sources. Hence, a chain effect would occur and the ties between Australia and China would be at risk, and the national and global economies would be jeopardised. As such, it is no wonder that the environment may be considered one of the greatest influences on the iron ore mining industry.

The final influence of considerable wealth that affects the iron ore mining industry in Australia is local and foreign government. The Australian government plays a large part in the industry through deregulation, trade barriers, industry support and export assistance. By removing industry regulations, the federal government has been able to increase competition and, hence, efficiency between the TNCs and the smaller industry participants. Trade barriers including tariffs and taxes are continually under negotiation to be reduced, so as to benefit Australia’s economy through other countries. For example, if another country were to pay fewer taxes and tariffs on Australian exports, that country would continue to return, as they are benefiting financially. As such, the Australian economy also profits from this further integration into the global market.

Deregulation and trade barrier negotiations also provide the government with a means to support the mining industries. The Department of Innovation, Industry, Science and Research offers support by developing international competitiveness and increasing productivity and efficiency. “The Department is committed to developing policies and delivering programs, in partnership with stakeholders, to provide lasting economic benefits ensuring Australia’s competitive future.” (Commonwealth of Australia, 2008) Both the state and federal governments provide export assistance to businesses within an industry. This assistance is not subject to a particular industry; it is diverse enough to accommodate for all Australian industries. The state governments control programs such as the ‘Trade Development Program’ and ‘Enterprise Improvement Programs’, which allow businesses to develop strategic planning and innovation, and establish and grow offshore commercial activities. At a federal level, there are three main companies that provide export assistance to all industries: Department of Foreign Affairs and Trade, Austrade and AusIndustry. Each of these companies put forth individual development programs and schemes to assist business exports, but to a more substantial level than that provided by the state governments.

Foreign governments do not play a role as large as the Australian government when considering the Australian iron ore mining industry, however, it must be noted that trade barrier negotiations between Australia and other countries is of great importance for exporting and importing. Therefore, the APEC agreement is so widely accepted, as it creates ease in trading and economic cooperation between the members.

The role of the government in the Australian iron ore mining industry is much the same as it would be for any other industry. The assistance provided by the state and federal governments is objective and the trade barrier negotiations are put in place to benefit all concerned. As such, the role of the government in the Australian iron ore mining industry is of a very high standard and is supportive and directive.

There are a number of forces for change that the Australian iron ore mining industry has taken control of and uses to its own advantage. For example expansion, diversification, technology, economic cycles and economies of scale. Within the industry, BHP Billiton and Rio Tinto have both utilised expansion to other countries and new target markets, and hence, diversified to accommodate the needs of the new target markets. As TNCs, they are also making use of their knowledge of economic cycles and economies of scale, in order to benefit themselves and the industry as a whole. Technology is a force that has been welcomed by the mining industry and has been proved to enhance the success and global recognition of the Australian iron ore mining industry. The few forces for change that this industry, such as regulations and barriers, has not utilised do not appear to be an issue and the industry itself is strong and unlikely to struggle because of unexpected change.

Among the issues currently affecting or emerging amongst the iron ore mining industry in Australia are slowing economies, health and safety regulations, recruitment and rapid expansion. With the conclusion of the 2008 Beijing Olympics, China is experiencing a slowing of its economy. The Chinese government is no longer expanding at the same scale as it was in the lead-up to the Olympics, so Australia’s iron ore is not needed for structural purposes of a similar standard. Hence, the iron ore mining industry in Australia is experiencing a slight downfall in sales to China, however it was an expected issue and it would have been prepared for. Health and safety regulations are constantly an issue in all industries, although many further regulations are imposed on mining because of the nature of the work. This is a continuous battle fought by those involved in the iron ore mining industry and it is one that is unlikely to cease in the near future. Recruitment is an issue similar to the health and safety regulations, in that it is a constant issue for all concerned in the industry. Again, it seems unlikely to be resolved in the near future. The rapid expansion experienced by the Australian iron ore mining industry itself, and in particular the TNCs, is not a current issue but if it the expansion continues at the same current rate, the industry may find itself slightly out of control. In this situation, the slowing economies issue would assist in preventing such an occurrence, as the expansion cannot occur without a strong market for the industry to rely on.

The issues that are currently affecting the Australian iron ore mining industry are constant and the operations managers have individual methods to overcome them. The companies within the mining industry may foresee emerging issues, and if so, they are most likely under control. In any situation, the iron ore mining industry is the strongest in Australia and it is able to withhold its position in the global marketplace and it will continue to support Australia’s integration into the global economy for many years to come.

Appendix: Review of The Literature

The Australian Bureau of Statistics website provided me with information on the change of the mining industry over the past decade and some of the issues I spoke of later in the report. The website is:

I located a PDF document titled The Australian Minerals Industry and the Australian Economy Factsheet, which contained the graph and table I used at the start of the report. I also referenced pieces of information from the document. The document can be found at:

I utilised an Australian Government webpage, from the Australian Atlas of Minerals, Resources, Mines & Processing Centres. The page gave details on the production and developments of iron ore mining and the world ranking of Australia in the industry. I also referred to this page in the report:

I found information on state and federal government export assistance, which I used in my report, from this site:

The industry support information was found on the Department of Innovation, Industry, Science and Research website:

I acquired some of the numerical figures from a webpage by the US Geological Survey:

The final source I used was the school textbook of which the bibliographic details are as follows:
Chapman, Stephen et al., 2000, Business Studies In Action: HSC Course – 2nd Edition, John Wiley & Sons Ltd, Milton.
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