Australian mining is losing global market share to rapidly emerging resource-rich economies, says a report from the Minerals Council of Australia.
To download the report, Opportunity at risk, Regaining our competitive edge in mineral resources, go to www.minerals.org.au
RENO (MINEWEB) – Australia’s mining boom is not over, says a study commissioned by the Minerals Council of Australia, but its dynamics have changed and its policy demands are greater and more urgent.
The report by the Australian strategy consulting firm, Port Jackson Partners, is the “most detailed panorama yet painted of the burgeoning cost environment in Australia, our deteriorating reputation as a place to do business and the threat this poses to our ability to capture market share and future investment,” said the Minerals Council.
In the study, Port Jackson Partners suggest that over the next 20 years, demand for key minerals will increase by between 50% and 200%. While growth in iron ore demand slows as infrastructure is developed, “there is likely to be new growth in demand for products such as copper, aluminium and other minerals and metals and consumers demand more sophisticated products.”
“If Australia can maintain market share through the next two decades, the country’s minerals revenue could increase by $121 billion per annum by 2031–a 65% increase for a sector already twice the size it was in 2006,” the report suggests. “Capturing this potential depends on out-competing our rivals for new projects.”
At existing mining operations, Australia’s cost position is declining with more than half of the nation’s mines experiencing operation costs above global averages, the study asserted. “Increased labour, energy and transport costs have all played a part.”
By 2020, Australian iron ore projects beyond the Pilbara are forecast to have higher delivered costs than benchmark Brazilian producers, and will cost up to 75% more to build than projects in West Africa, the study found.
For both copper and nickel, nearly half of Australia’s production is now in the most expensive 25% of mines globally.
“Previously untapped resources in the developing world are rapidly coming onstream,” said the report. “These new competitors are strengthened by improved policy settings, new technologies and new sources of capital.” The new competitors include the Democratic Republic of the Congo, Mongolia and Mozambique which are developing and sometimes reviving mineral industries by improving their institutions.
The report suggests that Australia is losing the battle for mining market share. “While volumes have grown in important commodities, our market shares are at best stagnant, and in some cases declining…”
Two important indicators of Australia’s competitive strength and the mining investment environment are in decline, the study advised. For instance, mining sector productivity “has fallen markedly and is well down from the historical highs.”
Meanwhile, Australia’s share of global exploration expenditure is also declining from 20% in the 1990s to 13% today. “At a time when global exploration activity has grown strongly, this loss of share represents a considerable missed opportunity. It speaks directly to the relatively weakness of Australia’s competitive position outside of iron ore,” said Port Jackson Partners.
COST COMPETIVENESS
“Capital costs for projects in Australia are rising faster than elsewhere…iron ore projects, for example, are currently 30% more expensive than the global average,” said the report. For instance, thermal coal project costs are 66% above the global average.
For the rest of this article, please go to the Mineweb.com website: http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=158717&sn=Detail&pid=102055