Deep sea mining puts $560 billion in land extraction at risk — report
Even in optimal scenarios, the activity would generate only $6.25 million in tax revenue for countries involved, says Planet Tracker.
Jeffrey Wilson of Murdoch University’s Asia Research Centre examines China’s pivotal role in the boom and possible bust of Australia’s iron ore sector.
According to Wilson writing in The Conversation, although the vigorous growth of the Australian iron ore sector has been due to China’s recent large-scale industrialization, the country’s top decision-makers currently seek to reduce the price of iron ore and the influence of major overseas suppliers.
Iron ore is pivotal to China’s steel industry as well as its industrialization and modernization process, yet the country lacks sufficient, high-quality reserves of its own and is dependent upon external sources.
China’s iron ore imports surged from 70 million tonnes in 2000 to 685 million tonnes in 2011, for a near 9-fold increase within little more than a decade.
This dependence upon external supply as well as the crucial role of iron in China’s modern re-making has left its political leaders extremely edgy about high ore prices, leading them to undertake repeated efforts to break the stranglehold of the big 3 iron ore firms – BHP Billiton (ASX:BHP), Rio Tinto (ASX:RIO) and Vale (NYS:VALE).
China attempted to establish an import cartel to challenge the power of the big three suppliers towards the end of the last decade, yet these efforts concluded disastrously with the Stern Hu Affair and iron ore prices have been riding high ever since.
Wilson says China’s alternative strategy of overseas investment in iron ore resources may yet prove successful. State-owned Chinese firms have invested AUD29 billion to back thirty five iron ore juniors in Australia, which are expected to produce a total of 425 million tonnes of iron ore per annum.
These measures could bring about the reduction in prices so desperately coveted by China’s political leaders, as well as an end to the Australian iron ore boom.
The magnitude of the effect of this strategy remains debated, with some predicting only moderate falls while others have forecast a halving of prices. But in either scenario, the federal Resources Minister is correct in claiming the boom times for iron ore investment are now over.
