Western Australia is the largest iron ore producer and exporter in the world, accounting for 38 per cent of global production and 53 per cent of global seaborne exports in 2016. The Pilbara region accounted for 95 per cent of Australia’s iron ore exports in 2016-17. The iron ore industry is a large part of Western Australia’s economy, accounting for 62 per cent of the value added by its mining industry and 18 per cent of its gross state product in 2016-17.
Western Australia exports all of its iron ore production because iron ore is used almost exclusively for steel making and there is no major steel production in Australia. Western Australia’s iron ore producers invested tens of billions of dollars in new mines and associated rail and port infrastructure in response to growth in Chinese steel production over the past decade. As a result, Western Australia’s iron ore production and exports have increased, mainly from the major iron ore miners: Rio Tinto, BHP and Fortescue Metals Group (which are behind only Brazilian company Vale as the world’s largest iron ore producers). The iron ore industry’s share of Western Australia’s gross state product tripled, increasing from 6 per cent in 2005-06 to 18 per cent in 2016-17.
China’s increasing demand for iron ore resulted in the iron ore price rising from around US$30 a tonne in 2002-03 to around US$150 a tonne in 2011-12. Western Australia’s increase in iron ore production displaced higher cost production in China and, combined with lower demand from Chinese steel makers, led to the iron ore price falling by 42 per cent in 2014-15 and a further 28 per cent in 2015-16. The annual average price for iron ore price increased by 35 per cent to US$70 a tonne in 2016-17 as demand from Chinese steel makers increased.
Western Australia’s iron ore industry remains globally competitive with high quality reserves, low cost production and established, long-term markets in China, Japan, Korea and Taiwan.
Iron ore sales
Western Australia’s iron ore sales increased from 259 million tonnes in 2006-07 to 790 million tonnes in 2016-17, at an annual average rate of 12 per cent. Western Australia’s sales of iron ore are expected to increase as mine construction and expansions are completed, but the rate of increase will be slower than the past ten years.
The 2017-18 Government Mid-Year Financial Projections Statement forecasts Western Australia’s iron ore sales to increase to 835 million tonnes by 2020-21.
Iron ore exports by destination
Western Australia exports nearly all the iron ore it produces to China, Japan, Korea and Taiwan. China accounted for 82 per cent of Western Australia’s iron ore exports in 2016-17, followed by Japan (9 per cent), Korea (6 per cent) and Taiwan (2 per cent).
In 2016-17, Western Australia’s iron ore exports to:
- China rose 5 per cent to 666 million tonnes.
- Japan fell 6 per cent to 69 million tonnes.
- Korea rose 4 per cent to 51 million tonnes.
- Taiwan rose 11 per cent to 17 million tonnes.
In 2016, Western Australia accounted for more than half of iron ore imports to China (63 per cent), Japan (55 per cent), Korea (70 per cent) and Taiwan (72 per cent).
Major iron ore producers’ sales from Western Australia
In 2016-17, the iron ore sales from Western Australia of:
- Rio Tinto fell 2 per cent to 323 million tonnes.
- BHP rose 4 per cent to 268 million tonnes.
- Fortescue Metals Group rose 1 per cent to 170 million tonnes.
Rio Tinto is developing Yandicoogina/Oxbow, West Angelas F, Silvergrass and Nammuldi deposits (over 40 mtpa), and proposing to develop the Koodaideri deposit (40 mtpa) by 2021.
BHP is ramping up the Jimblebar mine and proposing to develop the South Flank deposit to replace Yandi mine production by 2021 (80 mtpa).
Fortescue Metals Group needs to replace Firetail mine production by 2021 (23 mtpa).
Outside the majors, CITIC Pacific’s Sino Iron (28 mtpa) and Hancock Prospecting’s Roy Hill (55 mtpa) projects are ramping up production.