How has COVID-19 impacted country’s Iron ore industry?
Team Veye | 07 Sep 2020
China is known as the world’s manufacturing powerhouse. The expansion of steel production, particularly over the past decade, has been a significant driver of China's demand for raw materials, especially iron ore and coking coal. This has resulted in a considerable increase in China's imports of these commodities.
The Iron ore mining industry, which is one of the largest segment of the Australian mining industry has remained largely unaffected throughout the COVID-19 pandemic. Despite a weakening global demand because of lower steel production, Iron ore industry has delivered a strong performance.
Australia accounted for 53% of global iron ore production in 2019, while Brazil accounted for 21%. China accounted for over two-thirds of global iron ore demand. With the outbreak of pandemic, the Chinese Government had implemented significant stimulus measures intended to support steel production. This helped in preserving demand for Australian iron ore.
Massive outbreak of COVID-19 in Brazil disrupted mining operations in there. This reduced supply from that country and enabled Australian miners to increase prices. High prices and growth in output have enabled the industry to generate an estimated $103 billion in export revenue in 2019-20 according to the Office of the Chief Economist. This result represented the highest level of export revenue on record.
The mining industry was less disrupted by the pandemic as compared to other sectors of Australian industry since most of the major mines are at quite remote locations. Moreover, occupational safety has always been under great focus in the Australian mining industry.
The significant changes in commodity prices had also impacted the industry, though sometimes to their benefit. The decline in oil and gas prices contributed to reducing operating costs for most mining establishments.
Disclaimer : Veye Pty Ltd (ABN 54601621390) authorised representative (AR No. 001261006) of Vested Equities Pty Ltd which holds Australian Financial Services License (AFSL No. 478987). Veye is authorised to share only generic financial views through its website, reports and newsletters without taking into consideration your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure the accuracy of the content and that the information is gathered and processed from reliable resources, it is recommended you seek professional advice from your financial advisor or stockbroker before acting on any of our recommendations. Veye Pty Ltd advises it’s users to pursue investing as a long-term goal. Stocks are subject to real time changes therefore all the information we share represents our views at the date of publishing and we request our readers not to interpret our reports as direct recommendations. Past performance is no indication of potential future performance. The securities and financial products we study and share information on in Veye Reports may have a product disclosure statement or other offer document associated with them. You should obtain a copy of these documents before making any decision about acquiring the security or product. You can refer to our Term & Conditions and Financial Services Guide for more information. Veye Pty Ltd confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report (as mentioned on the website www.veye.com.au).