Minerals, petroleum drive rampant growth

Western Australia’s massive minerals and petroleum sectors dominate the state’s export commodity profile, with just one commodity in the top 10, wheat, from outside the resources industry.

Worth $53.4 billion to the state’s economy, the minerals and petroleum sectors experienced a 25 per cent increase in value in 2006-07, on the back of higher commodity prices.

As a whole, they comprise about 88 per cent of the state’s merchandise exports.

The biggest contributors last financial year were petroleum, iron ore and gold.

As a trio, they account for about 60 per cent of the resources industry’s total value.

Iron ore has been WA’s leading export commodity since 2004-05, generating $15.3 billion in export revenue last financial year.

This reflected an 8 per cent increase in production, compared with the previous financial year, and an increase of 25.9 per cent in value.

Since 2002-03, export revenue from iron ore has increased nearly 300 per cent, up from just $5.6 billion.

As a sector, iron ore makes up 25.3 per cent of total merchandise exports.

China is WA’s biggest iron ore market, taking 53.4 per cent of total exports.

Japan accounts for just over one quarter, with the remainder of exports taken up by South Korea (11 per cent), Taiwan, Europe and others.

Rio Tinto Iron Ore – ranked third on the exporters list – is WA’s largest producer of iron ore, with total sales of $7.79 billion last year.

Rio Tinto and BHP Billiton Iron Ore ($5.57 billion) together account for 87 per cent ($13.36 billion) of the state’s total iron ore exports.

Other players include Portman Ltd, which is ranked 13th on the WA Business News Book of Lists, and Sinosteel Australia Pty Ltd, ranked 19th.

The companies posted export revenues of $482.7 million and $254.8 million, respectively, last financial year.

Mount Gibson Iron Ltd, Midwest Corporation Ltd and Murchison Metals also export iron ore.

With Fortescue Metals Group planning to commence ore shipments in May next year, and both Rio Tinto and BHP proceeding with massive expansion projects, iron ore is expected to continue its record growth past 2007-08.

Petroleum is WA’s second largest export commodity, worth $10.9 billion to the state’s economy last year.

Japan accounts for nearly half of WA’s petroleum exports, with the other major markets being South Korea (15 per cent of total) and Singapore (9 per cent).

China, Indonesia and Thailand each account for 6 per cent of total petroleum exports.

Gold is ranked third on the commodities table, with exports totalling $10.4 billion in 2006-07.

WA’s production accounted for less than half of this amount ($4.1 billion), with the bulk of revenue being generated from refined product using gold sourced from other states and overseas. 

Gold refiner AGR Matthey is the state’s second largest exporter overall, with export revenues of $9.4 billion last financial year.

Gold Corporation, which is ranked 12th overall, is the state’s other major gold refiner and exporter.

The government-owned company, which is the trading company of the WA Mint, posted a slight fall in export revenue last year, from $719.9 million to $631 million.

This reflected a fall in the state’s gold production of nearly 6 per cent on the previous financial year.

Since 1986-87, the value of the state’s resource production has increased nearly 10-fold, with some sectors, such as nickel, performing well above the overall growth rate.

Despite nickel production being down 5 per cent in 2006-07, the value of nickel exports was up nearly 59 per cent, from $843 million to $1.3 billion, due to its price more than doubling in the period.

Nickel producers BHP Billiton Nickel West and Minara Resources Ltd are ranked 5th and 11th respectively, according to the Book of Lists.

Other commodities posting strong price increases were zinc (up 65 per cent on the average price in the previous financial year), lead (up 50 per cent), and cobalt and tin (up 46 per cent).

Gold was up 15 per cent and iron ore increased by 11 per cent.

Meanwhile, diamond sales were down 3 per cent in 2006-07, to 4.8 million carats.

The state’s major diamond producer, Rio Tinto’s Argyle Diamonds, reported a massive 39 per cent decrease in export revenue for the period, falling from $670 million to $406 million.

In its half-year report to June 2007, Rio Tinto said its earnings for the six-month period ($29 million) were down $12 million on the same period in 2006, due to lower prices for rough diamonds.

Higher sales volumes failed to balance the decline in price.

The state’s other major export commodities include LNG and alumina, which are categorised as ‘‘confidential trade’’.

WA Business News has estimated LNG exports to be worth $5.5 billion and alumina $4.8 billion.

Wheat exports generate $1.7 billion in revenue, while copper and mineral sands each contribute $0.9 billion.