The Australian mining industry has seen its shares of high and lows over the past decades. According to a recent article by The Australian “China key to miners’ survival” the Australian iron ore industry is in dire straits. Larger mining firms believe they can ride out the price drop, but many smaller firms are vulnerable.
Iron ore is a major part of the Australian mining industry and as of mid-September the price of ore hit a 5-year low. Experts don’t expect these prices to stay long-term, but the factors causing this are not going to improve soon. These low prices are stripping Australian mines of nearly all their profit and leaving many vulnerable. Large scale mining companies are said to be able to fare this burden better, and many smaller firms are on the brink of closing. The lower prices mean less operating income from the mines and coupled with rising operating costs some operators are getting hit hard.
The price decreases are a combination of low-demand and more international competition which is mainly China. There is, however a silver lining as many of the newer Chinese operations are high-cost and cannot profit with prices this low. Some see this as having a detrimental effect on the Chinese mining industry that could prohibit future interest in more iron ore mines in China. At this time, experts are not sure if these high cost mines will sustain themselves at this time of low prices or falter, relieving the pressure on the Australian operations. Iron ore prices have seen price cycles similar to this in recent years just not this drastic and are expected to rebound in the incoming months.
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The Australian link above is behind a pay-wall, you can read the article at Business Spectator.