Mining Industry in Australia: A Case Study of BHP Billiton and Iron Ore Market

ECONOMICS AND INTERNATIONAL TRADE
Economics and International Trade
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1ECONOMICS AND INTERNATIONAL TRADE
Table of Contents
Introduction................................................................................................................................2
Overview of mining industry in Australia.................................................................................2
Market structure of iron ore industry in Australia.....................................................................4
Demand and supply determinants..............................................................................................6
Price elasticity of demand..........................................................................................................7
Recent event affecting iron ore industry....................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................11

2ECONOMICS AND INTERNATIONAL TRADE
Introduction
In Australia, mining is one of the primary industries making significant contribution
to the economy. The mining activities are spread across all the state and territories. Estimates
show that 0.02 percent of land areas in Australia are directly affected by mining. Australia is
rich in different mineral resources. Minerals such as Iron ore, Nickel, Aluminum, Copper,
Gold, Silver, Uranium, Diamond, Zinc, coal, petroleum, natural gas and others are available
in large quantities (Eklund 2015). Apart from growth in domestic industries, the mineral
resources in Australia contributes to global growth. The report aims to evaluate mining
industry in Australia.
The chosen company for the analysis is BHP Billiton. It is one of the largest
diversified resource companies engage in discovery, conversion and development of various
natural resources such as iron ore, copper, coal, petroleum, nickel, natural gas and uranium
(bhp.com 2018). The paper considers iron ore market for demand and supply analysis. The
market structure, demand and supply determinants, elasticity of demand and impact of
sudden shock have been evaluated to completely understand the industry.
Overview of mining industry in Australia
Mining industry in Australia is considered as one of the vital pillars for the economy.
As recorded by Australian Bureau of Statistics, the gross value added of mining industry has
increased at an average annual rate of 6.5 percent in the last decade (Static.treasury.gov.au
2017) The industry alone account approximately 9 percent of the economy. Despite a
declining trend in global commodity prices mining industry remains largest exports earner for
Australian economy. In merchandise trade, mining accounts 64 percent. In total export, the
share of mining is 50 percent. Australia is world’s leading exporter iron ore. The iron ore
export accounts nearly 53 percent of world trade (Minister.industry.gov.au 2018).

3ECONOMICS AND INTERNATIONAL TRADE
Figure 1: Contribution of mining industry to employment and export
(Source: Static.treasury.gov.au 2018)
In addition to its contribution to national income and export earnings, the sector is
also important because of its contribution to national employment. Mining is one of largest
employers of labor force with employing more than 230,000 workers. Many of these workers
are employed in different regional areas of Australia. The substantial investment made in the
resource sector largely benefits the workers (Pwc.com.au 2018). The expansion of capital
stock has contributed to an increase in average weekly earnings of labor force by 66 percent.