Impact of Technological Innovations on Australia's Metals and Mining Industry

This article discusses the impact of technological innovations on Australia's metals and mining industry. It covers the overview of the industry, demand elasticity for Fortescue Metals Group Ltd's products, factors affecting the elasticity of demand, and the effect of technological innovations on market demand, supply, price, and quantity.

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Part 1
Overview of the company
Fortescue Metals Group Ltd (FGM) is a public iron ore entity that is based in Australia. It was
founded in 2003 with its headquarters found in Perth, Western Australia. FGM is the most
prominent tenement firm in the Pilbara region, whereby its holdings cover a total area of about
87,000 km² (Mining industry report, 2017).
In comparison to other worldwide Iron ore producers, FGM is ranked fourth after Vale, Rio
Tinto, and BHP Billiton. Copper, Gold, Steel, Lithium, and Iron ore are the major products that
are produced and distributed by FGM across the world. Also, FGM has more than 5455
employees with A$8.888 Billion as its total revenue. Solomon Hub and Chichester Hub are the
two major operation areas found in Australia's Pilbara region (AFR, 2018).
Overview of the industry
FGM is categorized under the sector of Metals and Mining in Australia. Mining is a primary
activity which takes place in all territories and states of Australia, which directs impacts about
0.02% of the land surface in this nation (Asx.com.au, 2019). Currently, the most significant areas
for mining include; Pilbara region, Peel, Goldfields, Bowen basin, Hunter region as well as
Latrobe region. Some of the mineral resources that are mined in Australia include; iron ore,
copper, gold, nickel, uranium, opal, zinc, natural gas, silver, and aluminum, among others. BHP,
OneSteel, Lihir Gold, Newcrest Mining, Fortescue Metals Group, Rio Tinto, Alumina Ltd, and
Vale are the major players in the metals and mining industry of Australia (Christopher 2016, p.
90). Such a factor shows that both home-based and multinational companies are engaging in
Australia’s metals and mining industry, thus effective exploitation of the various mineral

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resources. Presence of multiple home-based and foreign companies that are participating in the
metals and mining industry has made Australia be the biggest exporter of alumina, gold, coal,
iron ore, and other resources in the world. Statistics indicated that Australia is set to reap about
$250 billion from the exports due to its effective and competitive metals and mining industry
(Australian Industry Report, 2016). Metals and mining industry contributes about 8.5% to the
Gross Domestic Product of Australia. Also, the sector employs about 2% of the total labor force
in Australia, that is approximately 220,000 persons ((Tradingeconomics.com, 2019). The total
revenue of the metals and mining industry is about A$1.54 million. The current growth rate of
Australia's metals and mining industry is approximately 6.5%, which is a significant rise from
6.1% that was realized in 2018 (Statista.com, 2019). From the above statistics and discussion, it
can be seen that Australia's metals and mining industry are greatly contributing to its economic
growth due to the significantly huge revenues that are gained from its mineral exports.
Part 4
Demand elasticity for Fortescue Metals Group Ltd’s products
The elasticity of demand is an element that measures that degree of responsiveness to changes in
prices of a product or a service. The elasticity of demand may either be elastic, inelastic, or
unitary demanding on the value of Price Elasticity of Demand (PED). For example, if PED is
equal to one, then, the elasticity of demand is said to be unitary. Also, PED is higher than one
then, the elasticity of demand is said to be elastic, and in case PED is less than one, the elasticity
of demand is said to be inelastic (Serapio, 2018). Fortescue Metals Group Ltd's products are
consumed across the globe, and they include; iron ore, copper, steel, gold as well as lithium. As
such, the demand elasticity for the above products is elastic because of the several firms that are

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also producing similar products across the globe. Elasticity demand for FGM's products implies
that any changes in the market prices for its products significantly lead to changes in their
demand. For example, when prices for FGM's products increase, their demand dramatically
decreases because they are easily substituted by products from rival firms like Vale and BHP
(Australian Industry Report, 2016). This is because the consumers will seek to make use of
cheaper substitutes to FGM's highly priced products, thus significantly decreasing the quantity
that is demanded and sold. On the other hand, when prices of FGM's products fall, the amount
demanded will likely increase due to increased purchasing power. From the above discussion, it
can be viewed that the demand elasticity of FGM’s products is elastic across its domestic and
global markets due to sensitivity in quantity demanded when changes in price take place.
Factors that affect the elasticity of demand for Fortescue Metals Group Ltd’s products
Degree of substitutability and the number of competitors in the industry are the two
significant factors that affect the elasticity of demand for Fortescue Metals Group Ltd's products.
FGM's products are highly substitutable because consumers can derive the same degree of
satisfaction when they make use of its rivals' products. Competitors like Vale and BHP also
engage in the production of iron ore, coal, and copper, which increases the degree of
substitutability of FGM's products. In case of price increases for FGM's products, consumers
may opt for products produced by BHP or Vale, especially when their prices remain constant
(Schofield, 2017). The above factor means that the overall quantity demanded FGM's products
will reduce due to price increases and reduced number of consumers. On the other hand,
decreases in the price of FGM's products will likely attract more consumers, which increases the
overall quantity demanded. The above takes place when the consumers viewed products offered

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by Vale and BHP as being expensive as compared to FGM’s products whose prices have been
decreased.
The number of competitors in the metals and mining industry also dramatically affects
the elasticity of demand for FGM's products across the domestic and global markets. FGM has
over five rival firms such as BHP, Rio Tinto, Vale, Newcrest, and Alumina, among others in
Australia that are engaging in the production of similar products. Such a factor means that their
stiff competition as far as capturing a larger market share is concerned. These firms are engaging
in price wars as a way of obtaining large market shares and thus significantly affecting the
elasticity of demand for FGM's products (Serapio, 2018). For example, quantity demanded
FGM's products is always changing due to changes in prices arising from the price wars among
the many competing firms. From the above discussion, it can be seen that the significant number
of competing firms in the metals and mining industry are significantly affecting the elasticity of
demand for FGM's products due to price wars.
Part 5
Brief description of the event
Rapid technological innovation has been the most recent event that is likely to have substantial
impacts on Australia’s metals and mining industry. Due to advancements in technology, the
majority of the companies in Australia have made use of various innovations aimed at enhancing
their output through eased processes of extraction and processing of mineral resources. These
innovations have been mainly using technologically inbuilt equipment and machinery to
facilitate the extraction and processing of mineral resources as a way of enhancing the overall
output and revenues. Some of the equipment and machinery that are being used include; smart

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sensors, drones, automated drilling, autonomous vehicles, as well as boring tunnel devices (Bliss,
2018). The above technological innovations are aimed at enhancing electrifications, digitization,
and automation of all the processes involved in extracting and processing of minerals resources.
Moreover, use of technological innovations has been desired to reduce on use of labor-intensive
techniques which would result in delayed supply and shortages.
How technological innovations have affected market demand and supply
Technological innovations have not only positively impacted the metals and mining industry but
also, the market demand and supply. In regards to market demand, technological innovations
have significantly increased demand for high-quality products from the various mineral
resources in Australia. Moreover, high-quality products generated through the use of
technological innovation have a higher durability and weather resistance potential for individuals
and firms that are engaging in construction projects (Darren, 2018). As such, the demand for
low-quality products across the markets is deteriorating as constructors and firms are highly
demanding for better quality products that are being manufactured from technological
techniques.
On the other hand, technological innovations have increased the supply of better quality products
across the various markets across the globe. The above is attributed to the fact that technological
innovations are facilitating the production of vast volumes of output in the shortest time possible
due to electrification, digitization, and automation techniques. Moreover, technological
equipment in the form of sensors, drillers, and drones are diligent, flexible, and versatile, which
enhances the production of high volumes of output in the shortest time possible. For example,

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Rio Tinto has integrated automation approaches in its processes, which has improved the degree
of production efficiency and increased its overall output (Thomas 2011, p.8). Therefore, there are
limited prospects of a supply shortage or fall in demand for high-quality products in the metals
and mining industry due to the current use of technological innovation techniques.
Effect of technological innovations on the market price and quantity
Technological innovations have increased market prices because the firms are producing high-
quality products. As a result, the premium qualities of the products fetch significantly higher
prices on the market as compared to low-quality products. On the other hand, the market quantity
of high-quality products has also been increased due to technological innovations (Bliss, 2018).
This is attributed to the fact that technologically inbuilt equipment can maximize the level of
output in the shortest time possible.

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References
AFR.,(2018). Top 500 companies in Australia: Retrieved from
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companies-2018-the-full-list-20180903-h14w4v
Asx.com.au., (2019). Metals & Mining Sector Profile: Retrieved from
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b.pdf
Australian Industry Report., (2016). Accessed at:
https://publications.industry.gov.au/publications/australianindustryreport2016/assets/
Australian-Industry-Report-2016.pdf
Bliss, M., (2018).How Technological Innovation is Impacting the Mining Sector: Retrieved from
https://www.igfmining.org/technological-innovation-impacting-mining-sector/
Christopher, A., (2016). Mineral Commodity Summaries. Reston, VA: U.S. Geological Survey.
pp. 90–91
Darren, G., (2018). "Fortescue Metals to develop $1.7b iron ore project in WA". The Sydney
Morning Herald.
Mining industry report., (2017). Retrieved from: https://www.pwc.com.au/eum/aussie-mine-
2017-decisionsdecisions_nov17.pdf

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Schofield, A., (2017). Australia's Identified Mineral Resources: Canberra: Geosciences
Australia: 10. ISSN 1327-1466
Serapio, M., (2018). Australia's Fortescue considers diversifying into gold, copper, energy:
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Statista.com., (2019).Total revenue of Evolution Mining Limited from the financial year 2009 to
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Thomas, P., (2011). Introduction: Complex Technology in Human-Built World: How to Think
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