Iron ore profile
Western Australia Iron ore Industry Profile November 2015
Western Australia is the largest iron ore producer in the world, accounting for 32% of global production in 2013. The Pilbara region accounted for 93% of Australian iron ore production in 2014. Iron ore is used almost exclusively for steel production and with no significant steel production in Australia, virtually all of Western Australia’s iron ore production is exported. China is the world’s largest steel producer and iron ore consumer and is Western Australia’s largest export market. In response to growth in Chinese steel production over the past decade, Western Australian iron ore producers invested in the construction of mines and associated infrastructure. As construction on these projects has completed, production and exports have increased, primarily from the major iron ore miners: Rio Tinto, BHP Billiton and Fortescue Metals Group. China’s increasing demand for iron ore resulted in the iron ore price rising from around US$30 a tonne in 2002-03 to around US$150 a tonne in 2011-12. The increase in iron ore production in Western Australia displaced higher cost production in China and combined with weakening demand from Chinese steel makers led to the iron ore price falling by over 40% in 2014-15. While lower iron ore prices have affected the profitability of Western Australia’s producers and the Western Australian Government’s royalty revenue, Western Australia’s iron ore industry remains competitive with high quality iron ore reserves, low cost producers and proximity to key markets in China, Japan and South Korea. Iron ore sales (volume) 800Mt
Between 2003-04 and 2014-16 sales of iron ore increased from 233.2 million tonnes a year to 512.6 million tonnes, at an annual growth rate of 12.4%.
600Mt
The 2015-16 State Budget forecasts that sales of iron ore will increase as mine construction and expansions are completed, but the rate of increase will be slower than the past ten years.
400Mt
Western Australia’s iron ore sales are forecast to rise by an annual average of 2.8% to 799 million tonnes between 2014-15 and 2018-19.
200Mt
0Mt 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15 2016-17 2018-19 Note – Projections and forecasts start in 2014-15. Source: Western Australia 2014-15 State Budget and Mid-year Financial Projections Statement; and Western Australia Department of State Development.
Iron ore exports by destination
Western Australia exports nearly all the iron ore it produces to China, Japan, South Korea and Taiwan.
700Mt
China accounted for 80% of Western Australia’s iron ore exports in 2014-15, followed by Japan (10%), South Korea (7%) and Taiwan (2%).
600Mt 500Mt
Western Australia’s iron ore exports to China rose 19.1% to 583.6 million tonnes in 2014-15, below annual average growth of 19.5% over the past ten years.
400Mt 300Mt
Western Australia’s iron ore exports to Japan fell 1.2% to 74.8 million tonnes in 2014-15, which is greater than the annual average decline of 0.7% over the past ten years.
200Mt 100Mt 0Mt 1994-95
1999-00 China
2004-05 Japan
Korea
2009-10
2014-15
Taiwan
Western Australia’s iron ore exports to Taiwan (up 16.9% to 16.3 million tonnes) and Korea (up 0.5% to 51 million tonnes) increased in 2014-15.
Source: ABS 5368.0 International Trade in Goods and Services; and Western Australia Department of Mines and Petroleum, Resource Data Files.
WA Iron Ore Industry Profile – November 2015
Page 1 of 4
Release Classification – Public
Western Australia Iron ore Industry Profile November 2015
Major iron ore producers - 2013 Western Australia Brazil China India Russia Ukraine South Africa USA Canada
Iran 0Mt
200Mt Exported
400Mt
600Mt
Used domestically/inventories
Western Australia is the largest iron ore producer in the world, accounting for 32% (593 million tonnes) of world iron ore production and 42% (562 million tonnes) of world iron ore exports in 2013. Western Australia exported 95% of its iron ore production in 2013, with the rest stockpiled. Brazil accounted for 20% (364 million tonnes) of world iron ore production and 25% (330 million tonnes) of world iron ore exports in 2013. Brazil exported 91% of its iron ore production in 2013. China accounted for 15% (269 million tonnes) of world iron ore production in 2013. China used or held in inventories all of its iron ore production in 2013.
Source: World Steel Association; and Bureau of Resources and Energy Economics, Resources and Energy Statistics Annual and Quarterly.
Quarterly production from major Western Australian producers 100Mt
80Mt
60Mt
40Mt
20Mt
0Mt Jun-09
Jun-10
Jun-11
Rio Tinto(a)
Jun-12
Jun-13
BHP Billiton(a)
Jun-14
Jun-15
FMG(a)
Wet tonnes and inclusive of third party tonnes. Western Australian operations. Source: Company Quarterly Production Reports.
Major exporting ports
345Mt
Port Hedland
418Mt 139Mt
Dampier
131Mt 111Mt
Cape Lambert
145Mt
Geraldton
2014-15
13Mt 11Mt
Esperance
Yampi Sound
2013-14
14Mt
11Mt
5Mt 3Mt 0Mt
100Mt
200Mt
300Mt
400Mt
500Mt
Source: ABS 5368.0 International Trade in Goods and Services.
WA Iron Ore Industry Profile – November 2015
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Rio Tinto, BHP Billiton and Fortescue Metal Group are the three largest iron ore producers in Western Australia. Brazilian company Vale is the largest iron ore producer in the world, followed by Rio Tinto, BHP Billiton and Fortescue Metals Group. Rio Tinto’s iron ore production in Western Australia rose 8.6% to 77.2 million tonnes in the June quarter 2015 and 12.7% to 296.5 million tonnes in 2014-15. BHP Billiton’s iron ore production in Western Australia rose 1.5% to 65.3 million tonnes in the June quarter 2015 and 12.6% to 253.5 million tonnes in 2014-15. Fortescue Metals Group’s iron ore production in Western Australia rose 18.6% to 42.1 million tonnes in the June quarter 2015 and 17.0% to 164.1million tonnes in 2014-15. Port Hedland, Dampier and Cape Lambert are the largest iron ore export ports in Western Australia. Port Hedland is the world’s largest bulk export port. Iron ore exports from Port Hedland rose 21% to 418 million tonnes in 2014-15, accounting for 57% of the State’s iron ore exports. Iron ore exports from Cape Lambert rose 31% to 145 million tonnes in 2014-15, contributing 20% of the State’s iron ore exports. Iron ore exports from Dampier fell 5% to 131 million tonnes in 2014-15, contributing 18% of the State’s iron ore exports. The fall was due to Rio Tinto increasing its exports from Cape Lambert following the completion of an expansion project. By 2017-18 capacity at Port Hedland could reach 495 million tonnes. In 2014-15 Rio Tinto completed expansions at Cape Lambert and Dampier, raising capacity to 210 million tonnes and 150 million tonnes respectively. Release Classification – Public
Western Australia Iron ore Industry Profile November 2015
Iron ore prices
The average spot price of iron ore imports to China (including shipping costs) in 2014-15 was US$71.5 a tonne, 42% (US$51.2) lower than the 2013-14 average price. The 2015-16 State Budget forecasts the average spot price of iron ore imports to China will fall to US$47.5 a tonne in 2015-16, before increasing to US$61.80 a tonne by 2018-19. The decrease in the price of iron ore is due to large increases in production by major iron ore producers (Vale, Rio Tinto, BHP Billiton and FMG) and new mines (including Roy Hill), combined with weaker Chinese demand for iron ore.
$US200/t
$US150/t
$US100/t
$US50/t
$US0/t 1994-95
1998-99
2002-03
2006-07
2010-11
2014-15
2018-19
Source: World Bank, Commodity Price Data; and 2015-16 State Budget.
Value of exports and royalties $80b
$8b
$60b
$6b
$40b
$4b
$20b
$2b
$0b 1994-95
1999-00
2004-05
Exports (left axis)
2009-10
$0b 2014-15
Royalties (right axis)
Source: Western Australia Department of Mines and Petroleum, Resource Data Files, ABS 5368.0 International Trade in Goods and Services; and Western Australia 2015-16 State Budget.
Iron ore accounted for 48% of the value of Western Australia’s exports in 2014-15. The value of Western Australia’s iron ore exports fell 26.5% to $53.3 billion in 2014-15, significantly below annual average growth of 21% over the past ten years. Iron ore royalty income was Western Australia’s third largest source of revenue in 2014-15, accounting for 14.2% of total revenue and 86.8% of royalty revenue. Western Australia’s iron ore royalties fell 27.4% to $3.9 billion in 2014-15, from a peak of $5.5 billion in 2013-14. The decline in royalty revenue is due to the fall in the price of iron ore, which is offset partially by increased production volumes and a lower AUD/USD exchange rate.
Gross value added $70b $60b $50b $40b $30b $20b $10b
$0b 1993-94
1998-99
2003-04
2008-09
2013-14
1
Australian iron ore mining industry gross value added multiplied by the State’s share of Australia’s value of iron ore mining industry production (ranging between 98% and 100%). Source: ABS 5204.0 Australian System of National Accounts; 8155.0 Australian Industry; and 5220.0 Australian State Accounts.
WA Iron Ore Industry Profile – November 2015
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The iron ore mining industry’s gross value added in Western Australia rose 30% to $58.5 billion in 2013-14, compared with annual average growth of 23% over the past ten years. In real terms, value added rose at an average of 12.5% a year over the same period. The iron ore mining industry contributed 74% of Western Australia’s mining industry gross value added in 2013-14, compared to 48% in 2003-04. In 2013-14, the Western Australian iron ore mining industry contributed 42% of Australia’s total mining industry gross value added. The iron ore mining industry contributed 22% of Western Australia’s gross state product in 2013-14, compared to 8% in 2003-04.
Release Classification – Public
Western Australia Iron ore Industry Profile November 2015
Iron content of Western Australian iron ore production 800Mt
80%
600Mt
60%
400Mt
40%
200Mt
20%
0Mt
Between 2003 and 2013, Western Australia’s iron ore production increased by 185%, from 208 million tonnes to 593 million tonnes, but ore quality measured by iron content was fairly stable. Western Australia’s crude iron ore production contained an estimated 367 million tonnes of iron (62.0%) in 2013. Brazil’s crude iron ore production contains an average of 65% iron content. China’s crude iron ore production contains an average of 26% iron content.
0% 2003
2005
2007
Iron content
2009
2011
Crude ore residual
2013
Iron content (%Fe)
Source: United Nations Conference On Trade and Investment, The Iron Ore Market; and Bureau of Resources and Energy Economics, Resources and Energy Annual and Quarterly
1
Estimated resources of iron ore 60Bt
180yrs
40Bt
120yrs
20Bt
60yrs
0Bt 1993-94
1998-99
2003-04
2008-09
0yrs 2013-14
Economic demonstrated resource (billion tonnes) Resource life (years of production) 1
Australia’s iron ore resources multiplied by Western Australia’s estimated share of 94%. Source: ABS 5204.0 Australian System of National Accounts.
The United States Geological Survey estimates that, in 2014, Western Australia has the largest economically demonstrated iron ore reserves in the world. Western Australia’s estimated economic demonstrated iron ore resources rose 17.7% to 53.8 billion tonnes in 2013-14. However, Western Australia’s estimated iron ore resource life fell from 89 to 86 years of production between 2012-13 and 2013-14. Although estimated resources increased, there was an increase in the assumed rate of production, resulting in a slightly lower estimated resource life. Iron ore exploration expenditure in Western Australia fell 36% to $406.2 million in 2014-15.
Shipping costs to China
Western Australian shipping spot freight rates to China and other Asian markets are lower than rates from other large iron ore exporting countries, primarily because it is closer. In 2014-15, iron ore spot freight rates from Western Australia to China were 58% (US$8.7) a tonne lower than from Brazil and 43% (US$4.6) lower than from South Africa. Iron ore spot freight rates from Western Australia to China fell 36% to US$6.2 a tonne in 2014-15, following an increase of 25% in 2013-14. Iron ore spot freight rates from Brazil to China fell 35% to US$15.0 a tonne in 2014-15, following an increase of 20% in 2013-14.
$US35/t $US30/t $US25/t $US20/t $US15/t $US10/t $US5/t $US0/t Jan-11
Jan-12 Brazil
Jan-13 South Africa
Jan-14
Jan-15
WA
Source: The TEX Report
WA Iron Ore Industry Profile – November 2015
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Release Classification – Public
Western Australia is the largest iron ore producer in the world, accounting for 32% of global production in 2013. The Pilbara region accounted for 93% of Australian iron ore production in 2014. Iron ore is used almost exclusively for steel production and with no significant steel production in Australia, virtually all of Western Australia’s iron ore production is exported. China is the world’s largest steel producer and iron ore consumer and is Western Australia’s largest export market. In response to growth in Chinese steel production over the past decade, Western Australian iron ore producers invested in the construction of mines and associated infrastructure. As construction on these projects has completed, production and exports have increased, primarily from the major iron ore miners: Rio Tinto, BHP Billiton and Fortescue Metals Group. China’s increasing demand for iron ore resulted in the iron ore price rising from around US$30 a tonne in 2002-03 to around US$150 a tonne in 2011-12. The increase in iron ore production in Western Australia displaced higher cost production in China and combined with weakening demand from Chinese steel makers led to the iron ore price falling by over 40% in 2014-15. While lower iron ore prices have affected the profitability of Western Australia’s producers and the Western Australian Government’s royalty revenue, Western Australia’s iron ore industry remains competitive with high quality iron ore reserves, low cost producers and proximity to key markets in China, Japan and South Korea. Iron ore sales (volume) 800Mt
Between 2003-04 and 2014-16 sales of iron ore increased from 233.2 million tonnes a year to 512.6 million tonnes, at an annual growth rate of 12.4%.
600Mt
The 2015-16 State Budget forecasts that sales of iron ore will increase as mine construction and expansions are completed, but the rate of increase will be slower than the past ten years.
400Mt
Western Australia’s iron ore sales are forecast to rise by an annual average of 2.8% to 799 million tonnes between 2014-15 and 2018-19.
200Mt
0Mt 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15 2016-17 2018-19 Note – Projections and forecasts start in 2014-15. Source: Western Australia 2014-15 State Budget and Mid-year Financial Projections Statement; and Western Australia Department of State Development.
Iron ore exports by destination
Western Australia exports nearly all the iron ore it produces to China, Japan, South Korea and Taiwan.
700Mt
China accounted for 80% of Western Australia’s iron ore exports in 2014-15, followed by Japan (10%), South Korea (7%) and Taiwan (2%).
600Mt 500Mt
Western Australia’s iron ore exports to China rose 19.1% to 583.6 million tonnes in 2014-15, below annual average growth of 19.5% over the past ten years.
400Mt 300Mt
Western Australia’s iron ore exports to Japan fell 1.2% to 74.8 million tonnes in 2014-15, which is greater than the annual average decline of 0.7% over the past ten years.
200Mt 100Mt 0Mt 1994-95
1999-00 China
2004-05 Japan
Korea
2009-10
2014-15
Taiwan
Western Australia’s iron ore exports to Taiwan (up 16.9% to 16.3 million tonnes) and Korea (up 0.5% to 51 million tonnes) increased in 2014-15.
Source: ABS 5368.0 International Trade in Goods and Services; and Western Australia Department of Mines and Petroleum, Resource Data Files.
WA Iron Ore Industry Profile – November 2015
Page 1 of 4
Release Classification – Public
Western Australia Iron ore Industry Profile November 2015
Major iron ore producers - 2013 Western Australia Brazil China India Russia Ukraine South Africa USA Canada
Iran 0Mt
200Mt Exported
400Mt
600Mt
Used domestically/inventories
Western Australia is the largest iron ore producer in the world, accounting for 32% (593 million tonnes) of world iron ore production and 42% (562 million tonnes) of world iron ore exports in 2013. Western Australia exported 95% of its iron ore production in 2013, with the rest stockpiled. Brazil accounted for 20% (364 million tonnes) of world iron ore production and 25% (330 million tonnes) of world iron ore exports in 2013. Brazil exported 91% of its iron ore production in 2013. China accounted for 15% (269 million tonnes) of world iron ore production in 2013. China used or held in inventories all of its iron ore production in 2013.
Source: World Steel Association; and Bureau of Resources and Energy Economics, Resources and Energy Statistics Annual and Quarterly.
Quarterly production from major Western Australian producers 100Mt
80Mt
60Mt
40Mt
20Mt
0Mt Jun-09
Jun-10
Jun-11
Rio Tinto(a)
Jun-12
Jun-13
BHP Billiton(a)
Jun-14
Jun-15
FMG(a)
Wet tonnes and inclusive of third party tonnes. Western Australian operations. Source: Company Quarterly Production Reports.
Major exporting ports
345Mt
Port Hedland
418Mt 139Mt
Dampier
131Mt 111Mt
Cape Lambert
145Mt
Geraldton
2014-15
13Mt 11Mt
Esperance
Yampi Sound
2013-14
14Mt
11Mt
5Mt 3Mt 0Mt
100Mt
200Mt
300Mt
400Mt
500Mt
Source: ABS 5368.0 International Trade in Goods and Services.
WA Iron Ore Industry Profile – November 2015
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Rio Tinto, BHP Billiton and Fortescue Metal Group are the three largest iron ore producers in Western Australia. Brazilian company Vale is the largest iron ore producer in the world, followed by Rio Tinto, BHP Billiton and Fortescue Metals Group. Rio Tinto’s iron ore production in Western Australia rose 8.6% to 77.2 million tonnes in the June quarter 2015 and 12.7% to 296.5 million tonnes in 2014-15. BHP Billiton’s iron ore production in Western Australia rose 1.5% to 65.3 million tonnes in the June quarter 2015 and 12.6% to 253.5 million tonnes in 2014-15. Fortescue Metals Group’s iron ore production in Western Australia rose 18.6% to 42.1 million tonnes in the June quarter 2015 and 17.0% to 164.1million tonnes in 2014-15. Port Hedland, Dampier and Cape Lambert are the largest iron ore export ports in Western Australia. Port Hedland is the world’s largest bulk export port. Iron ore exports from Port Hedland rose 21% to 418 million tonnes in 2014-15, accounting for 57% of the State’s iron ore exports. Iron ore exports from Cape Lambert rose 31% to 145 million tonnes in 2014-15, contributing 20% of the State’s iron ore exports. Iron ore exports from Dampier fell 5% to 131 million tonnes in 2014-15, contributing 18% of the State’s iron ore exports. The fall was due to Rio Tinto increasing its exports from Cape Lambert following the completion of an expansion project. By 2017-18 capacity at Port Hedland could reach 495 million tonnes. In 2014-15 Rio Tinto completed expansions at Cape Lambert and Dampier, raising capacity to 210 million tonnes and 150 million tonnes respectively. Release Classification – Public
Western Australia Iron ore Industry Profile November 2015
Iron ore prices
The average spot price of iron ore imports to China (including shipping costs) in 2014-15 was US$71.5 a tonne, 42% (US$51.2) lower than the 2013-14 average price. The 2015-16 State Budget forecasts the average spot price of iron ore imports to China will fall to US$47.5 a tonne in 2015-16, before increasing to US$61.80 a tonne by 2018-19. The decrease in the price of iron ore is due to large increases in production by major iron ore producers (Vale, Rio Tinto, BHP Billiton and FMG) and new mines (including Roy Hill), combined with weaker Chinese demand for iron ore.
$US200/t
$US150/t
$US100/t
$US50/t
$US0/t 1994-95
1998-99
2002-03
2006-07
2010-11
2014-15
2018-19
Source: World Bank, Commodity Price Data; and 2015-16 State Budget.
Value of exports and royalties $80b
$8b
$60b
$6b
$40b
$4b
$20b
$2b
$0b 1994-95
1999-00
2004-05
Exports (left axis)
2009-10
$0b 2014-15
Royalties (right axis)
Source: Western Australia Department of Mines and Petroleum, Resource Data Files, ABS 5368.0 International Trade in Goods and Services; and Western Australia 2015-16 State Budget.
Iron ore accounted for 48% of the value of Western Australia’s exports in 2014-15. The value of Western Australia’s iron ore exports fell 26.5% to $53.3 billion in 2014-15, significantly below annual average growth of 21% over the past ten years. Iron ore royalty income was Western Australia’s third largest source of revenue in 2014-15, accounting for 14.2% of total revenue and 86.8% of royalty revenue. Western Australia’s iron ore royalties fell 27.4% to $3.9 billion in 2014-15, from a peak of $5.5 billion in 2013-14. The decline in royalty revenue is due to the fall in the price of iron ore, which is offset partially by increased production volumes and a lower AUD/USD exchange rate.
Gross value added $70b $60b $50b $40b $30b $20b $10b
$0b 1993-94
1998-99
2003-04
2008-09
2013-14
1
Australian iron ore mining industry gross value added multiplied by the State’s share of Australia’s value of iron ore mining industry production (ranging between 98% and 100%). Source: ABS 5204.0 Australian System of National Accounts; 8155.0 Australian Industry; and 5220.0 Australian State Accounts.
WA Iron Ore Industry Profile – November 2015
Page 3 of 4
The iron ore mining industry’s gross value added in Western Australia rose 30% to $58.5 billion in 2013-14, compared with annual average growth of 23% over the past ten years. In real terms, value added rose at an average of 12.5% a year over the same period. The iron ore mining industry contributed 74% of Western Australia’s mining industry gross value added in 2013-14, compared to 48% in 2003-04. In 2013-14, the Western Australian iron ore mining industry contributed 42% of Australia’s total mining industry gross value added. The iron ore mining industry contributed 22% of Western Australia’s gross state product in 2013-14, compared to 8% in 2003-04.
Release Classification – Public
Western Australia Iron ore Industry Profile November 2015
Iron content of Western Australian iron ore production 800Mt
80%
600Mt
60%
400Mt
40%
200Mt
20%
0Mt
Between 2003 and 2013, Western Australia’s iron ore production increased by 185%, from 208 million tonnes to 593 million tonnes, but ore quality measured by iron content was fairly stable. Western Australia’s crude iron ore production contained an estimated 367 million tonnes of iron (62.0%) in 2013. Brazil’s crude iron ore production contains an average of 65% iron content. China’s crude iron ore production contains an average of 26% iron content.
0% 2003
2005
2007
Iron content
2009
2011
Crude ore residual
2013
Iron content (%Fe)
Source: United Nations Conference On Trade and Investment, The Iron Ore Market; and Bureau of Resources and Energy Economics, Resources and Energy Annual and Quarterly
1
Estimated resources of iron ore 60Bt
180yrs
40Bt
120yrs
20Bt
60yrs
0Bt 1993-94
1998-99
2003-04
2008-09
0yrs 2013-14
Economic demonstrated resource (billion tonnes) Resource life (years of production) 1
Australia’s iron ore resources multiplied by Western Australia’s estimated share of 94%. Source: ABS 5204.0 Australian System of National Accounts.
The United States Geological Survey estimates that, in 2014, Western Australia has the largest economically demonstrated iron ore reserves in the world. Western Australia’s estimated economic demonstrated iron ore resources rose 17.7% to 53.8 billion tonnes in 2013-14. However, Western Australia’s estimated iron ore resource life fell from 89 to 86 years of production between 2012-13 and 2013-14. Although estimated resources increased, there was an increase in the assumed rate of production, resulting in a slightly lower estimated resource life. Iron ore exploration expenditure in Western Australia fell 36% to $406.2 million in 2014-15.
Shipping costs to China
Western Australian shipping spot freight rates to China and other Asian markets are lower than rates from other large iron ore exporting countries, primarily because it is closer. In 2014-15, iron ore spot freight rates from Western Australia to China were 58% (US$8.7) a tonne lower than from Brazil and 43% (US$4.6) lower than from South Africa. Iron ore spot freight rates from Western Australia to China fell 36% to US$6.2 a tonne in 2014-15, following an increase of 25% in 2013-14. Iron ore spot freight rates from Brazil to China fell 35% to US$15.0 a tonne in 2014-15, following an increase of 20% in 2013-14.
$US35/t $US30/t $US25/t $US20/t $US15/t $US10/t $US5/t $US0/t Jan-11
Jan-12 Brazil
Jan-13 South Africa
Jan-14
Jan-15
WA
Source: The TEX Report
WA Iron Ore Industry Profile – November 2015
Page 4 of 4
Release Classification – Public
