The world’s iron ore powerhouse is preparing to reinvent itself
iron ore, ready to be poured into a procession of bulk carriers bound for Asia’s steel mills.
Rio Tinto Group, the world’s largest iron ore producer, shipped its first cargo of the steelmaking ingredient from this spot in 1966, at the dawn of a boom that minted billionaires and lifted the Australian economy, generating A$1.3 trillion ($820 billion) in earnings in the past two decades alone. Last year, iron ore shipments accounted for about 5% of the country’s gross domestic product.
But now China is cooling, while steel producers are under pressure to clean up a sector that accounts for at least 7% of global greenhouse gas emissions, a change that will require new methods and higher-quality raw materials.
Much of the dry, dusty Pilbara region’s gargantuan resource base may no longer make the grade.
Rio, BHP Group Ltd.
and Fortescue Metals Group Ltd. produce almost two-thirds of the world’s seaborne iron ore from Western Australia, and margins remain enviable.
For the first time in a generation, though, the specter of disruption looms over mining’s most reliable profit generator.
“Australia’s ore industry is now at the start of a long-term structural decline,” said Tom Price, a London-based analyst at Liberum Capital Ltd.
“It’s a fundamental shift that will resonate across the Australian economy.”
The first, and most urgent, question is China, which accounts for about 85% of Australia’s export earnings from iron ore.
Demand for steel in the second-biggest economy has plateaued and production is on track to peak before the end of the decade, dented by a years-long crisis in China’s property sector, which has typically consumed more than a third of the country’s steel output. While there’s some growth in smaller
