Debunking the Myths.

90% of world metal

Myth:

We shouldn’t be producing iron ore that no one wants.

Fact:

Iron ore makes steel, which makes up more than 90% of all metal used in the world today. While iron ore prices have dropped recently after reaching record highs, that does not mean that demand has stopped. The global appetite for iron ore and steel continues to remain strong and China’s annual consumption alone is expected to reach 1 billion tonnes a year by 2030.

MYTH-2

Myth:

Global iron ore prices are controlled by a few big Australian players.

Fact:

All of Australia’s iron ore miners combined only account for around 30% of global production. Australia is the second largest producer of iron ore behind China and competes with a total of around 50 iron ore producing countries. Like any commodity, prices regularly fluctuate as buyers and sellers compete on the global market, and respond to changes in demand.

MYTH-3

Myth:

There is limited competition in the iron ore market.

Fact:

There are more than 20 iron ore companies in Australia alone. And 50 countries around the world that produce and compete in the iron ore market place. All despite the considerable cost involved in setting up mining infrastructure in remote areas, both in Australia and around the world. Competition is fierce and that is why Australia’s hard-earned reputation as a low cost and competitive iron producer is so vital to maintain.

MYTH-4

Myth:

Capping Australian iron ore production will increase prices.

Fact:

Australia competes against 50 other iron ore producing countries. China produces more than twice as much iron ore than Australia. And the largest iron ore producer in the world is a Brazilian company. If Australia’s iron ore production is capped, competitors in the global market place would seize the opportunity to fill the gap and take the market share that Australia has worked hard to gain and maintain over many years.

Myth 5

Myth:

The Australian government should intervene in free markets to control pricing.

Fact:

The Australian government can’t control global markets. Fixing Australian prices or supply levels can only result in harming both the Australian iron ore industry and our international reputation as a sound place to invest, not to mention the royalties and taxes which fund many of our vital services and infrastructure.

MYTH 6

Myth:

As the biggest iron ore producer Australia should control global prices.

Fact:

Australia is not the world’s biggest iron ore producer. It is second behind China, though our iron ore is a higher quality. And 50 other countries all compete on the global iron ore market. No one country could hope to set prices, as buyers have numerous options available.

MYTH-7

Myth:

Rio Tinto and BHP Billiton have been flooding the iron ore market.

Fact:

The iron ore market share of Rio Tinto and BHP Billiton has remained steady for a decade, despite growth in global demand. In the past 5 years the biggest growth in iron ore production in Australia has come from Fortescue Metals Group which has increased production by 106 million tonnes. This is compared to BHP Billiton with 80 million tonnes and Rio Tinto 63 million tonnes.

Over the next two years Rio Tinto will add a further 20 million tonnes to the 1.4 billion tonne–plus global iron market (in 2014). Companies in Brazil are proposing to add more than 100 million tonnes or more to meet global demand, far more than any planned production increases in Australia.

Prices achieved during the last 5 years have been due to unprecedented growth in China. This set record high prices for iron ore. As China slows growth to sustainable levels, iron ore prices are now returning to the long-term average, due to natural market forces.

MYTH-8

Myth:

There isn’t any transparency in how iron ore prices are set.

Fact:

“What is it that determines the iron ore price? That’s simple: supply and demand.” 

– Forbes Magazine June 2012

MYTH-9

Myth:

The halving of iron ore prices over the past 12 months threatens the standard of living of every Australian.

Fact:

All Australians have benefited from the growth of our iron ore sector, which will continue to make a very substantial contribution to the Australian economy in the decades ahead through jobs and taxes and royalties which help provide essential services and infrastructure. The standard of living reached under a strong mining industry can be maintained if Australia keeps mining strong.

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