Australia’s Mining Boom Is Not Over Yet

BRISBANE, Australia - Sept. 1, 2013 - PRLog -- If you believed the hot air coming from the mouths of Australian politicians, you’d be forgiven for thinking it was time to pack up the resources sector and go home.

The mining boom is over they contend, in an attempt to defend a flagging domestic economy that, they now say, over-estimated the Chinese growth story.

From a Chinese perspective, this is far from so. At last week’s Melbourne Mining Club lunch, Wang Jiahua, executive vice president of the China Mining Association, was adamant the current mining boom is not over.

Wang said China would depend on Australian resources to underpin its growth for several more years, but warned there was a mismatch between the “interests and profits between upstream suppliers and downstream buyers.

“The global mining industry has yet to establish a shared framework and a fair minerals pricing mechanism is yet to form,” Mr Wang said.

He did not expand on specifics but Wang may have been referring to Chinese discomfort with a handful of large mining companies dominating the trade of a single commodity like iron ore or coal, which is perceived to give those companies undue influence over pricing.

Regardless of different views of who should reap its profits, the boom has a long way to go, according to Wang, backed by the ongoing massive industrialisation and urbanisation process China is unfolding. Central government planning, for instance, envisages 200 million more farmers moving to Chinese cities by 2030, to lift China’s current urbanisation rate above current levels of 52%.

Wang said this kind of infrastructure expansion would underpin demand for resources.

He pointed to other emerging economies also starting the industrialization and urbanization process, such as Central, South and South East Asia, which will drive demand for incremental mining resources.

Despite his upbeat outlook, Wang did warn that continuation of the boom was dependent on a range of factors including developed countries emerging from recession – an acknowledgement of China’s interdependence on the economic welfare of other trading countries.

Wang also told the audience of mining professionals why he thought Chinese investment in the Australian mining sector has slowed. He said Australia’s Minerals Resource Rent Tax, brought in during the GFC, had been “confusing” for Chinese investors.

Some Chinese investments had been failures which had lead to a ‘lose-lose’ situation. He was critical that optimum mining capacity could not always be realised, also mentioning a lag in infrastructure required to move product.

Wang put forward a case for Chinese workers being used during project development, “to fully utilise the advantages of labour in China and allow a project to quickly achieve productivity.”

He said once the project was completed, the Chinese workers would go home and the project handed back to Australian control. The solution would also solve the skilled labour shortage problem Australia is experiencing, he added.

While Mr Wang’s argument might make eminent economic sense, the issue of using foreign labour to build resources projects is highly controversial in Australia and universally condemned by powerful union interests and the current Labour government.

Development of the coal-rich Galilee Basin using Chinese and Indian labour has been quietly discussed in boardrooms for some time but any public mention of the idea has attracted cries of outrage from union officials.

This report first appeared in the Australian Coal Report. Providing a comprehensive, weekly overview of the Australian thermal and coking coal markets, the Australian Coal Report includes analysis, commentary and news on this key production centre. Included is a dedicated infrastructure section, monthly export statistics, pricing intelligence, key index markers, freight figures and more. Please visit http://www.coalportal.com to receive a complimentary copy of the report.