An Analysis of the Iron Ore Market's Impact on the Australian Economy

This report provides a comprehensive analysis of the iron ore market and its substantial impact on the Australian economy over the past 10 years. It begins with an introduction defining key concepts and the significance of iron ore as a crucial commodity, especially for steel production and Australia's economic development. The report then delves into the background of the study, emphasizing the role of resource economics in the industry and the historical growth of the iron ore market in Australia. A literature review explores the role of the iron ore market in the Australian economy, examining its influence on GDP, employment, and export revenues. The research aims to explore the impact of iron ore exports on the Australian economy, including the analysis of the role and significance of iron ore, the relationship between employment and GDP, and the evaluation of the impact of iron ore exports on employment levels, as well as recommendations to overcome negative impacts. The methodology section outlines the inductive research approach, descriptive research design, and the use of secondary data collection through books, articles, and internet resources, followed by qualitative and quantitative data analysis techniques. The report highlights Australia's position as a leading global producer and exporter of iron ore, and examines the economic contributions of iron ore, including its impact on government revenues, foreign direct investment, and employment. Furthermore, the report discusses the challenges faced by the industry, such as fluctuating iron ore prices, and their impact on the Australian economy.

An analysis of the Iron Ore market and its
impact in the Australian economy for the
past 10 years

1.0 : Introduction
1.1 Definitions and key concepts
Iron ore is found in three major type of iron-bearing minerals, that is magnetite, goethite
and haematite. Iron ore market plays significant role in growth and development of Australia
economy. It has been regarded as the second most essential commodity after Crude Oil. Iron ore
is regarded as the backbone of the global infrastructure and is the main input for the production
of primary steel. (Sarkar, Habib and Westerholm, 2015). At present, the Iron ore market was
extremely opaque.
Title: An analysis of the Iron Ore market and its impact in the Australian economy for the past
10 years.
1.2 Background of the study
For personnel involved in the resource industries, resource economics are the essential
requirement. Resources posses unique position for final products rarely sold as a consumer
product. For those who produce metallurgical coal and iron ore while the same time if the
country is moving to the developing stage the production of steel is a big concern. With the
production of steel, the need for metallurgical coal and iron ore is expected to increase demand
(Egglseder, Cruden, and Nicholas, 2017). The iron ore market has encountered a high growth in
Australia over a past decade. The growth of iron ore is very vigorous and steady in Australia. In
2017, Australia is ranked first globally with 52 million tonnes of iron ore reserve. Mostly in the
South Australia and Western Australia the Iron ore reserved were founded. On the other side in
terms of production of Iron ore, Australia remains at the first position globally (Murphy and
Silversides, 2017.).
1.3 Literature review
Analyse the role/significance of Iron ore market on the Australian economy
According to the view of Yellishetty and Mudd, (2014), at the present time although there
is an increase in the price of iron ore but still there is some bound and dullness in its price. As the
demand for steel increase in the developing country in the upcoming time the supply will
eventually meet the demand. Iron ore is the second largest commodity after oil in the world.
Australia has the sustainable share of the market of iron ore which helps the economy to grow
and develop. (Allen and Day, 2014). There are low-cost Australian miners who are well

positioned for continuing to supply in a market at low price. To strengthen the economy iron ore
is one such industry which plays the remarkable role. In order to built transport, housing,
infrastructure, machinery, and much more steel is required in all the economies of the world.
Whenever extremely important infrastructure has to be built the demand for consumer goods
such as machinery and factories grow which leads to increase the national income of that
economy ().
Further, when society becomes urbanised then steel is required for the urban transport
such as cars, trains etc. Steel remains for a longer time and after the certain period of time, it can
be recycled. It shows that demand for steel continues to increase which shows that iron will
continue to play a significant role which leads to support the economic growth. As per the view
of Munro and Mohajerani, (2016) Australian iron ore has made the huge contribution to the
economy since from last few years. It helps in building a reputation of the most productive and
competitive iron ore producer in all over the world. The iron ore mines of Australia suspended
then suppliers all over the world will void. Due to this reason, Australia market share gets lower
and it can lose jobs. Angerer, Duuring, and McCuaig, (2015) state that Iron ore is one of the
most successful commodities of Australia There are many changes which are brought in this iron
ore industry help in the development of the economy. Some of the important changes which are
brought in it are known as continuous expansion and diversification of the iron ore industry.
Further, there are some driving forces of globalisation which directly impact Australian Iron ore
market in term of the global and national economies. China is known as one of the largest
importers of Australian iron ore and its put greater influence on the success of Iron ore industry.
About 2lac people are employed in the iron ore industries of Australia which indirectly is
advantageous to many more people. For the social well-being of the regional communities, it is
very important. It ensures many young people to stay in regional communities to help in building
their careers.(Measham, Haslam and Franks, 2013). It helps the local small businesses through
sourcing supplies locally.
Roughly about $25 billion of Australia's national income in the form of taxes and
royalties are derived from iron ore industry.(Iron Ore Mining in Australia to 2021 - Production
Remains Buoyant Supported by New Projects. 2017). In Australia iron ore and the related
activities, foreign direct investment was about $270 billion which represented 38% of FDI as on
2010. Leaving behind coal iron ore is Australia's most valuable export worth $48 billion. As a

result in an increase in worlds steel production, there is a rapid economic growth in Asia-Pacific
region. Of about 85-90% of Australia's production of the iron ore is exported. Australia is ahead
of the export of iron ore from Brazil and India.
The impact of Iron Ore market in the Australian economy for the past 10 years
According to the Teitler, Duuring, and Hagemann, (2017) Australia is rotating its
economy away from iron ore and coal. Rather than just mining the mineral if it develops the new
techniques which would convert the synthetic diamonds for use in creating carbon fibers
Australia can capitalize on graphite. After crude oil iron ore market has been the second-largest
commodity market and Australia has a substantial share of such market accounting for about half
of the seaborne iron ore market. Market characterised by the low price the low-cost Australian
miners are well positioned to continue supply (Russell, 2016). To replace the low-cost miners of
Australia and Brazil the World Bank has forecast the price of iron ore form $41 per metric
tonnes to $50 per metric tonnes form 2016 to 2020 respectively. Iron ore is the major export
earner in Australian economy of about $75 billion. The Australian economy is currently
producing about 700 million tonnes of iron ore per year (Chen, Lei. and Jiang, 2016). About
60,000+ highly skilled workers from engineers to geologists and from infrastructure expert to
operators are given employment. As per the view of Allen and Day, (2014) More than $10
billion taxes and royalties are paid to Australian government by iron ore industries.
50 countries of the world are producing iron ore but Australia report to about 38% of
global production (Hurst, 2015). To meet the global demand of iron ore Australia will remain
increasing the production of it. Between 2010 to 2014 Australia's iron ore production has
increased which include the major iron ore producing companies which are Fortescue Metal
Group about 97 million tonnes, BHP Billiton about 52 million and Rio Tinto of about 42 million
tonnes (Andrews, Evans and Honeyands, 2016).
In the past few months price of iron ore is gradually decreasing from USD 135/tonnes to
USD 90/tonnes. This is the recent global decline of iron ore price which is impacting local
Australian mining companies (Lau, de Castro and Cantarino, 20164). This decline will now lead
to producing lower grade ore in the attempt to render some sustainability over the difficult period
is a major concern.
As seen that iron ore industry has a huge effect on the Australian economy as it holds the large
part of the government's revenues. Australia has been the largest producer and largest exporter of

the iron ore in the world (Donovan and Hartley, 2016). But now the declining price of the iron
ore in the international markets are of a big concern to the Australian government as the revenue
generation is going down.
According to the view of (Teitler, Duuring and Hagemann, 2017)Iron ore mining is
the major contributor to Australia's economy and also the significant primary industry.
About $140 billion per annum is the total production of iron ore in Australia which is
certainly over half i.e. 54% of total goods and service (Measham and Franks, 2013). The
contribution of iron ore in the Australia's economy's GDP is about 6-8% which is far
more than agricultural which 3% and tourism which is 2%. there are about 600000 in
support industries about 200000 in direct industries which are about 2% of the total
workforce (Merdith, Landgrebe and Müller, 2015). About 76% of all the electricity
generated from iron ore industries. Some of the minerals products are also included like
aluminum, copper, iron, gold, mineral sands, zinc and coal and Australia is one of the
largest producers of them all.
Overall it is concluded that Iron Ore play the significant role in the growth and
development of the economy (Haugaard, Pecoits and Konhauser, 2016). The Australian
economy is strengthened with the help of this Iron Ore industry. Further, it shows that it
reflects positive impact on the Australian economy.
1.4 Research Aim and Objectives
Aims: To explore the impact of export Iron Ore in the Australian economy for the past 10 years.
Objectives:
 To analyse the role/significance of export Iron ore on the Australian economy.
 To understand the link between employment level and GDP with export of iron ore
 To evaluate the impact of export of iron ore on the employment level in Australia.
 To recommend the strategies to overcome the negative impact of Iron ore market in the
Australian economy.
2.0 Methods
2.1 General approach: For carrying out the whole study in an appropriate manner the use
of research approach is one of the best methods. There is two type of research approach that is

deductive and inductive which can be used for conducting the investigation. In the present report,
the researcher is using inductive approach because it assists in finding out the impact of iron ore
on Australian economy (Wang, Beal and Vandenberg, 2017.). Along with this, with the use of
this approach, it becomes easy for the investigator to get the specific and relevant information.
2.2 Research design:
It is one of the best ways through which it becomes easy for the researcher to analyse the way
Iron Ore market can impact the Australian economy. There are different types of research design
that is exploratory, explanatory, descriptive, case study etc (Tincani and Travers, 2017). In this
study, the investigator is using descriptive research design in order to carry out entire study in an
effective manner.
2.3 Data collection: The two major type of data which is collected by the investigator are
primary and secondary data. The data which are not published by any author in any book or
journals and which is highly reliable is known as primary data. The information which is already
published in books, news, and internet which is basically old is known as secondary data.
Secondary data is collected by information and investigating can be used from books, articles,
and internet. While primary data is collected by conducting a survey, interview method etc.
The present report is based on investigating the impact of Iron Ore market in the Australian
economy for the past 10 years. Therefore, secondary information is collected by the scholar
(Creswell and Poth, 2017).Here, the researcher is using books, internet, and articles for collecting
the information. This assist in getting deep information related to Iron ore market and researcher
can easily get the valid outcome.
2.4 Data analysis: For analysing the collected data researcher can use both qualitative and
quantitative techniques. However, the selection of the techniques is depended on the type of
investigation which is carried out in the present research. . Along with this, themes, and charts
are used for interpreting the collecting data (Edson, Henning and Sankaran, 2016). On the other
hand in qualitative techniques, the gathered information is presented in the numeric form. There
are different types of test which are applied to getting the result such as Chi-square test,
descriptive test, and T-test etc. The present report is based on investigating the impact of Iron
Ore market in the Australian economy for the past 10 years. Here, all the information is collected

from secondary sources, so researcher is using quantitative techniques for analysing the
collecting data. This help in presenting the finding in an appropriate manner.
Population and sampling
Analytical approach
Step one : Finding the data
The mining sector of Australia at present contribute up to 8.5% to Australia GDP which
is total output and employs is up to 2% of the workforce that is around 220,000. There is the tax
which is the need to pay to the government and lots of discussions are done on tax. In the
financial year of 2013-2014, the mining sector paid up to $12.7 billion taxes. Further one of the
biggest impact of the mining sector is on exports that are in recent year it made upto 50% of
Australia total export earning. The impact of the mining boom on exports is high for instance in
2000 to 2010 it is the value of the mining is an increase from $63 billion to $139 billion that is
120%.
Step Two : Research related to topic and variables
There are three variables two of depended and one is independent. Here export is independent
variable and GDP and employment level is the dependent variable. Therefore the iron ore mining
in Australia linked to directly employes more than 60,000 candidates in a line of highly skilled
jobs. Along with this, there are more than 1000 people who are employed in the local business.
They supply in mines and transport the iron ore.
Step three: Research Question
 What is the link between employment level and GDP with export of iron ore
 What is the effect of export of iron ore on the employment level in Australia.
Export is the independent variable
GDP & Employment level is the dependent variable
Export is independent variable whereas employment level and GDP is directly depend on the
export of iron ore.
Step four: Analysis
As per the Australian Bureau of Statistics show that earning from energy and minerals
export is reached upto $195 billion last year in previous year. The below graph reflect that iron
ore and coal export earning is followed by the liquefied natural gas.

Year GDP Employment Export
2006 3 95.317 15247
2007 3.7 95.723 16257
2008 3.7 95.866 30143
2009 1.8 94.54 30048
2010 2 5.211 49378
2011 1.4 94.889 64098
2012 3.6 94.451 54448
2013 2.6 94.311 69491
2014 2.6 93.456 66074
2015 2.4 93.408 49102
2016 2.8 95.262 41499
Correlation
-
0.43411127
7 -0.1100293266
Correlation is -0.43 and -0.11: From the above result it shows the negative correlation
which indicates that extent to which one variable is increase as the other decreases. With the
increase of iron ore exporting their there will be decrease in employment rate and GDP
Mean: 2.690 and 86.58: It is interpreted that mean of GDP is 2.69 which is avergae GDP there is
fluction in the variables but in many years GDP remains in nearby 2. On the other side
Employment is 86.58 which is average.
Standard deviation : Standard deviation is 0.77 of GDP which indicate that there are less
chances of increase in GDP in the future. On the other side is Employment is 27.00 which
indicate that employment rate can be increase in future.
T-test applied on Export and GDP
Export GDP

Mean
44162.2727
272727
2.69090909
09
Variance
369414530.
818182
0.60090909
09
Observations 11 11
Hypothesized Mean
Difference 0
df 10
t Stat
7.62016380
5
P(T<=t) one-tail
8.99162531
716244E-
006
t Critical one-tail
1.81246110
22
P(T<=t) two-tail
1.79832506
343249E-
005
t Critical two-tail
2.22813884
24
Interpretation: From the above T-test result is 1.79 which indicate that there is no significant
different in the on exporting the iron ore on GDP.
T-test applied on Export and Employment
t-Test: Two-Sample Assuming
Unequal Variances

Export Employment
Mean
44162.2727
272727
86.5849090
909
Variance
369414530.
818182
729.047347
6909
Observations 11 11
Hypothesized Mean
Difference 0
df 10
t Stat
7.60567958
34
P(T<=t) one-tail
9.14080123
950839E-
006
t Critical one-tail
1.81246110
22
P(T<=t) two-tail
1.82816024
790168E-
005
t Critical two-tail
2.22813884
24
Interpretation: From the above T-test result is 1.79 which indicate that there is no significant
difference in the on employment rate because of exporting the iron ore.
3.0 Findings and Recommend
Australia is the largest producer of iron ore and also being the largest exporter and China
is its largest importer. In 2017 it was ranked first with 52 million tonnes of iron ore reserve. The

Australian government has its most revenue generation from iron ore industry only. As China is
the biggest importer of Australia's iron ore so it has put greater influence on the success of the
industry.
But now declining price of iron ore in the world market is a big concern to the Australia's
government as the revenues are going down. Iron ore is traditionally the second-largest industry
after coal. Western Australia is the largest producer of iron ore in Australia. And rest also found
in South Australia (Fairley, Lovegrove and Brown, 2016). The dynamic of the current iron
market has led to greater economic instability for some companies in the industry evidenced by
the current trend of some mining operations and project development towards suspension. It also
shows that demand for iron ore is continued to increase but its price in the global market is
decreasing which is leading to the down fall of the profit generation. Price decrease is forcing the
Australia's government to supply iron ore at a low price only (Angerer and McCuaig, 2015).
4.0 Discussion and conclusion
It can be said by the following report on Iron ore mining in Australia is the leading
exporter and producer (Thorne, Hagemann and Banks, 2014). It ranked first globally in 2017 of
the iron ore reserve of the world. In about 5 years and over the past decade Australia has found a
high growth in the iron ore industry. It is doing very well in terms of the revenue generation from
iron ore export. China is the main importer of the Australia's iron ore. In 2008-09 China was the
main importer of Western Australian ore having taken 64% or $21 billion in value. This followed
by Japan the second most importer with 21% and the South Korea with 10% and Taiwan with
3%. We can easily understand the importance of iron ore mining in the Australia's growth and
progress. The present report is based on the inductive approach as it assist in finding out the
impact of iron ore on Australian economy. Along with this the use of this approach it becomes
easy for the investigator to get specific and relevant information. Therefore, the growth is found
to be more consistence and high. Most of the economic growth depends on the supply of iron ore
as is the main participation in Australia's GDP every year.