The recent crash in iron ore prices on the global commodities markets have had many analysts calling an end to the Australian mining boom.
However, it may still be too soon to call it quits. While in the short-term, mining might be struggling, the future is a lot brighter than many may think.
Why did the price for iron ore fall?
The drop in the global price of iron ore at the end of last year was attributed to two major factors: a significant fall in demand from Australia’s major importer of iron ore, China, coupled with the over-supply of the commodity caused by over investment in new mines when the price was at historic highs.
Based on forecasts released by the Department of Industry and Science’s Chief Economist Mark Cully, over the short-term, commodity prices will remain soft as surplus iron ore supply is absorbed. This is not good news for mining over the next few years, but a wider perspective offers hope.
Mining in Australia has historically been a cyclical economic affair. Rushes on mineral mining have come and gone as prices rise and fall and new mines are discovered and then depleted. Prior to the 1960s many in the industry believed Australia could never support a iron ore mining sector.
Now, this couldn’t be further from the truth with Australia now fostering one of the world’s most successful mining sectors, which in turn support a wide variety other businesses, like industrial measuring instrument suppliers.
The future of the mining industry
The medium-term view of mining in industry is much more positive as other economies replace China as major importers. Also other minerals face a much move positive future. For example, Coal exports to China are predicted to increase to 160 million tonnes over the next five years, according to Australian Mining.
“Over the medium term, growth in commodity demand will be driven by emerging economies, particularly in Asia. However, demand growth projections will be sensitive to developments in China’s economy,” according to Chief Economist Mark Cully.
The defining theme of the century will be high levels of economic growth in the densely populated emerging economies of Asia.
Other mining commodities, such as coal, continue to expand and keep the mineral extraction industry growing as a whole. According to the Mining Council of Australia, by 2017 the mining industry in this country will once again be the largest producer of coal in the world.
This too is the result of emerging Asian economies increasing their demand for mineral making mining in Australia an industry still primed for growth into the future.