Overview

Iron ore is one of the world's most important mineral commodities, being used (in the form of steel) 20 times more than all other metals put together.

Western Australia's iron ore industry plays a pivotal role in the State's economy, contributing $8.3 billion in 2004/05 when production increased by 15% on the previous year to a record total of 233 million tonnes. This represents approximately one quarter of the value of the State's total resources output.

Iron ore sales are expected to continue to significantly increase over the next decade, underpinned by the ongoing strength of the Chinese, South Korean and Taiwanese steel industries, as well as continued strong demand from Japan. The CSIRO report indicated that demand for Australian iron ore could rise by more than 200 million tonnes a year over the next few years.

In 2006/07, iron ore is set to replace coal as Australia's most valuable export commodity, with export earnings predicted to increase by over 26% to $18 billion.

As a result of this increasing demand, iron ore prices have been very strong. On average, Western Australian iron ore prices increased by 68% over 2004/05, with continued growth in prices (albeit, at a slower rate) expected for the foreseeable future. The benchmark increase for iron ore prices for 2006 has risen by a further 19% for the 2006-2007 contract year.

The bulk of WA's iron ore industry is centred on operations in the Pilbara where two of the world's richest iron ore deposits are located - Tom Price (owned by Rio Tinto) and Mount Whaleback (owned by BHP Billiton).

The Pilbara accounts for approximately 95% of Australia's total current iron ore production, with the remainder primarily coming from other areas within Western Australia. Minor production also comes from Tasmania, New South Wales, Queensland and South Australia.