Australia’s mineral resources sector is set for a boost as iron ore prices soar and surpass the previous record set a decade ago – providing a welcome lift for the economy.
Analysts say the rise in international demand for iron ore is an indication that countries around the world – most notably China – are in the midst of a post-Covid recovery, with manufacturing and infrastructure projects again on the rise.
Financial information company S&P Global has called the recovery “staggering” and reported that “what we are witnessing is the continuation of a demand-driven trend that began exactly a year ago, when China saw a fast rebound in economic activity following its rapid exit from lockdown”.
According to S&P, China produces over 55 percent of the world’s steel and buys over half its seaborne iron ore.
Previous record price was in 2011
Iron ore spot prices have surged to as high as US$194.5 per tonne, beating the previous high of US$187, which was set in February 2011.
The price has risen by 21 percent since the start of 2021, and by more than 130 percent over the past year.
Australia is the world’s leading iron ore producer and exporter. The stronger prices are predicted to push Australian iron ore export values to a new high of A$136-billion in 2020-21, up from the previous record of A$103-billion in 2019-20.
“Australia’s resources sector and exports have underpinned our continued economic growth throughout the Covid-19 downturn,” resources minister Keith Pitt said.
Resources contributes 10% of GDP
“[The sector] accounts for around 10 percent of Australia’s GDP and directly employs around 262,000 Australian men and women, mostly in regional areas, and supports more than a million other jobs.
“Iron ore remains our single largest commodity export and it is forecast to earn Australia around A$700-billion from this financial year to 2025-26. Iron ore supports 45,600 direct Australian jobs. “
According to the minister, the high iron ore price is particularly beneficial for Western Australia as it is carrying the state’s economy through the coronavirus pandemic by providing approximately a quarter of the State Government’s revenue.
Pitt said iron ore is a big part of the Australian resources sector that is forecast to contribute A$296-billion in export earnings this year.