Australian Iron Ore Mining Industry Review

Topics: Rio Tinto Group, Mining, Iron ore Pages: 6 (1896 words) Published: September 15, 2008
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.” (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...
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