Iron ore is one of Australia's most abundant resources, as well as being one of the country's most valuable exports. As one of the world's major iron ore producers, Australia boasts the world's largest iron ore EDR at 25%. Considering these facts, there is still huge exploration potential for this metal, which looks set to continue as an important commodity for the country.

At National Plant & Equipment, as suppliers of iron ore mining machinery we're naturally interested in the future of iron ore mining. Here we take a look at this resource and the direction it will take in the foreseeable future.

OVERVIEW

There are three different types of iron ore - hematite, goethite, and magnetite. Most of the iron ore produced in Australia is of the hematite and goethite varieties, which has been good news for the industry as it is these types that are favoured by steel mills, thanks to the high grade iron they contain.

Since the 1960s, when an export ban was lifted, iron ore has been a growing industry for Australia. This culminated in the mining construction boom that began in 2010, which has now been tapering off since 2013.

MARKET SHIFTS

Only a few years ago, iron ore was at the forefront of the mining boom, with the metal overtaking coal as Australia's most valuable export in 2010. However, this prosperity couldn't last, and unfortunately iron ore was also a major factor in the downturn of the mining industry. Through spiralling prices of the metal, investors quickly lost confidence and dragged the rest of the industry down with them.

However, things haven't been as bad as expected, and we're now seeing a revival and stabilisation of the market. It's likely that we will now see this sector heading upwards once more, and it's expected that industry revenue will rebound.

In fact, over the last financial year, iron ore miners added $65 billion to their value - during a period when it's expected that prices will fall in this sector.

INDUSTRY DEMAND

The revival of the iron ore mining industry is in most part thanks to increased demand from China, which has always been insatiable for natural resources. The fate of the industry is tied to demands from the country, and will be heavily influenced by steel trends here, as well as by their price negotiations with the Japanese.

We're currently seeing an upswing in investment from China at the moment, thanks to their iron ore inventories having been very low for the many months. They're now restocking in record levels, and this purchasing is expected to continue in order to keep their steel mills running.

OTHER FACTORS

The fact that the Australian dollar is fairly weak at the moment will also have an effect on the iron ore industry, benefiting domestic miners over producers of the metal in other countries. However, it's too soon to be overly optimistic about prices.

Despite such positive projections, one setback is the ongoing skills shortage that the country is currently facing. This will continue to push up wage rates, which will naturally shorten the sector's profits.

While we can't expect another boom to match that of 2010, the future of iron ore largely looks promising. With ongoing mining exploration within this sector, and an upturn in industry demand, we should begin to see the metal return to some of its former glory as one of Australia's major exports.

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