PERTH (miningweekly.com) – New research commissioned by the Minerals Council of Australia (MCA) has revealed that despite the severe fall in iron-ore prices, the Australian iron-ore sector is expected to contribute more than A$600-billion to the economy over the next decade.

In the new report, titled ‘Iron Ore; The Bigger Picture’, consulting firm Port Jackson Partners noted that the Australian iron-ore sector benefited significantly from the resources boom, and ended the commodities boom in a stronger position than when it entered it.

The report found that the core of Australia’s iron-ore sector was robust, with more than 80% of the country’s production capacity falling within the bottom half of the global cost curve.

MCA deputy CEO John Kunkel noted that with output having risen from 170-million tonnes in 2000 to more than 650-million tonnes in 2014, the yearly level of activity in the iron-ore sector was now much greater than even the investment-driven activity over previous years.

However, with the price of iron-ore falling since the start of this year, a debate had emerged on whether the industry or government policy-makers could have acted to ensure that Australia could have maintained a foothold in a higher priced world.

The report made note of three points to be considered in the debate, one of which is that the actions of the Australian iron-ore sector were not the only, and not even the major, drivers of iron-ore prices.  The report noted that iron-ore trades in a global commodity market and recent price falls had not been out of line with trends in other commodity markets. 

Secondly, the report also pointed out that 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% in 2000 to 50% of the seaborne market in 2014, meant the industry could remain a “robust wealth generation machine” for the nation, even at long-term average prices or below.

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

The report recommended policies remain focused 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 rates.