PERTH (miningweekly.com) – The Minerals Council of Australia (MCA) has rejected the notion of capping iron-ore production in the Pilbara in the hopes of alleviating the price crash.
MCA CEO Brendan Pearson pointed out to the Committee for Economic Development of Australia that Australia accounted for only 20% of global iron-ore production. If iron-ore production were to be capped at 2010/11 levels, about A$50-billion in export revenue would be lost within just three years.
“That is like losing our third-largest export – education – every year for three years. If we apply that logic to the current financial year, the one-year loss to export earnings could be about A$25-billion.
Mining magnet Andrew Forrest recently made headlines after comments at a business dinner in Shanghai, where he suggested that major producers should cap production of iron-ore from the Pilbara, in an effort to stop the decline of the iron-ore price.
While the Australian Competition and Consumer Commission has called on Forrest to explain his call for an effective cartel, Fortescue MD Nev Power has defended the remarks, saying that they were validated under certain sections of the Competition and Consumer Act.
Meanwhile, Pearson noted that despite the fall in commodity prices, Australia’s top five commodities, which include iron-ore, coal, gold, copper and alumina, would continue to provide revenue.
“In 2013/14, these five exports generated A$142-billion in export earnings. In 2018/19, these same commodities are expected to generate A$177-billion in export earnings. That’s a compound annual growth rate of 4.5%,” Pearson said.
He added that while China’s steel production was expected to fall for the first time in 35 years during 2015, projections by financial institutions suggested that this production would recover to about 15% above the 2015 level by 2020.
“Australia’s commodity forecaster expects iron-ore exports, in real dollars, to be back at A$80-billion by 2019/20, up from an expected A$60-billion this year.”
He noted that the MCA also forecast that Australia would retake the position as the world’s largest coal exporter by 2017, with coal demand set to increase from China and India.