Despite the long-ballyhooed end of the mining boom, Western Australia's resources sector continues to perform impressively.
The latest round of official data from Western Australia’s Department of Mines and Petroleum puts the value of state’s resources industry in 2013-14 at $121.6 billion, equivalent to a year-on-year increase of 20 per cent.
The state’s stalwart export commodity of iron ore comprised the majority of that value, logging a record-breaking $73.7 billion in sales despite widespread concerns about easing growth in China and a potential slowdown in purchases by the Middle Kingdom’s steel-makers.
According to DMP data, WA’s iron ore exports increased by 23 per cent compared to 2012-13 to hit 631 million tonnes, and rose by 31 per cent in value compared to the preceding financial year.
Other minerals and resources also saw gains in output and sales, including gold, copper, lead, salt, diamonds, petroleum and LNG.
After iron ore gold was the second most valuable mineral sector, posting total sales of $8.8 billion, followed by alumina at $4.2 billion and nickel at $3.5 billion.
DMP imputes growth in the value of Western Australia’s resources sector to gains in the value of iron ore as well as a weakening of the Australian dollar, which was on average 10.5 per cent lower compared to the previous year.
Mineral and petroleum exports from Western Australia account for around 90 per cent of its total merchandise exports, which in turn account for around 48 per cent of the nation’s total merchandise exports.
Asia remains Western Australian biggest export destination, particularly given China’s immense appetite for iron ore. China accounted for 54 per cent of the state’s merchandise exports in 2013-2014, followed by Japan at 18 per cent, and South Korea at eight per cent.
DMP expects the resources sector to continue playing a dominant role in Australia’s economy given the number of plans for the development or expansion of projects, particularly iron ore and LNG.
The pivotal contribution made by iron ore to Western Australia’s resources sector could soon be undermined, however, by the recent dive in spot prices to below the US$80 threshold – their lowest level in over five years, and perilously close to the bottom that took many mining operations to the brink of demise.
The plunge in prices comes as a major shock to Western Australia’s budget planners, who saw iron ore prices remaining at $122.70 a ton on average in the coming years when the state budget was struck in May, as compared to the federal government forecast of $105 a ton.
Western Australia’s petroleum deposits could soon pick up any slack, however, with the sector as a whole valued at $26.5 billion, for growth of nine per cent year on year. The gains are primarily due to LNG, of which Western Australia accounts for nearly 90 per cent of capacity.
Curtin University economist John Edwards, who served as principal economic adviser to former prime minister Paul Keating, said Western Australia’s LNG exports could surge on the back of increased appetite from Japan, that has emerged as a result of a renewed aversion to nuclear energy in the wake of the Fukushima disaster.
Edwards anticipates a shift in Western Australia’s resources from iron ore and China to gas and Japan, with the increased value of LNG exports surpassing the sum of the increased value of metallurgical coal, thermal coal and iron ore combined.
Reg Howard-Smith, chief executive of the Chamber of Minerals and Energy of WA, said that the state’s LNG exports to Japan leaped 15 per cent in 2013, accounting for 75 per cent of volume.