Australia has already lost market share to international competitors in the race to meet the strongest global growth in demand for minerals and energy in a generation and could lose more if capacity constraints are not addressed, new research has found. The research by Access Economics, which was commissioned by the Minerals Council of Australia (MCA), showed that if Australia had maintained its global market share between 2002 and 2007, the minerals industry would have earned another A$17 billion in today’s prices – the equivalent of 1.6% of nominal national income in 2007. The benefits of successfully addressing capacity constraints are massive. The research shows if capacity constraints are overcome and market share expanded, Australia could be A$129 billion – or 8.5% of today’s national income – better off by the year 2020. In order to maintain Australia’s present global market share by the year 2020, Access Economics found that massive increases in minerals production will be required, specifically:

• Nickel production will have to grow by more than 120%
• Iron ore by more than 100%
• Zinc and copper by more than 80%
• Coal and lead by more than 40%
• Aluminium by more than 20%
• Gold by around 15%.

The research was commissioned by the MCA as part of a new flagship 2020 Vision Project outlined during the Minerals Industry Seminar by Ian Smith, MCA Chairman and the Managing Director & CEO of Newcrest Mining. The project was commissioned to provide a framework for the future development of the minerals industry and to identify appropriate policies and strategies to build capacity enabling Australia to maintain its position as a premium global supplier of minerals products well into the future.

Smith said the research findings: “indicate the current expansion in global demand for minerals is set to continue well into the future. This is great news for the industry and great news for Australia. The challenge will be to ensure that the present capacity constraints limiting supply are addressed – this is the economic policy issue of the moment.

“The speed and extent to which we address supply constraints is increasingly the key determinant of a country’s and an enterprise’s competitiveness. It presents Australian policy makers and the industry with an enormous challenge but also the prospect of great rewards.”

 Access Economics found that mining was one of the few industries where Australia is a global productivity leader.

“Mining is a rich field of comparative advantage for the Australian economy relative to the rest of the world – in part due to the quality and quantity of the natural resources on the continent, but also reflecting the high levels of productivity in the industry”, the research found. But Access Economics warns that once global market share is lost, it may be difficult to win back.

“If Australia fails to expand its production base at optimal pace, then we are foregoing that income to another region or country. And if that happens, the production gap, once opened will not be easily closed”.

A key issue identified by Access was the importance of getting the management of the supply chain right, including resolving issues around infrastructure development, regulation and ongoing management to allow the minerals industry to expand and export as quickly as possible. The capacity constraints include: chronic skills shortages, congested and poorly functioning export corridors, inadequate social and physical infrastructure in remote and regional communities, emerging shortages of energy and water and duplicative and excessive regulations.

Employment in the already buoyant minerals sector is set for even stronger growth with a 70% increase forecast by the year 2020. Professor Sue Richardson, Director of the National Institute of Labour Studies at Flinders University reported that the minerals industry in the year 2020 will need to employ an additional 90,000 people – a 70% increase on current employment levels.

This report forecasts 6% annual employment growth in the minerals sector to 2012 – double the Federal Government’s estimate of 3% and far higher than previous industry forecasts. The greatest demand will be in skilled trades with an additional 31,000 people required. Demand for semi-skilled operators will increase by 30,000 and demand for mining professionals will grow by 9,000 or 70% on current numbers.

MCA Chief Executive Mitchell H Hooke said the report’s findings showed the strength and longevity of the current minerals sector expansion was defying a whole range of predictions and underscored the view that the strong global growth was due to a profound underlying structural adjustment in the economy rather than a traditional commodity boom.

“Australia is expected to largely weather the current uncertainty in global financial markets resulting from the sub prime mortgage problems in the US and this is because of the strength in global demand for minerals and energy from especially developing countries such as China and India. We are confident we are three years into a ‘super cycle’ of global demand for our products – a decade and more of sustained demand – which some consider could even last 20 years.

“This super cycle of demand is driven by an underlying structural adjustment in the global economy and the global industry, more so than the traditional drivers of the commodity cycles and is like nothing like we’ve experienced in a generation.

“The strong growth in employment to the year 2020 has the potential to benefit local communities and Indigenous communities in remote and regional areas, where many of our new minerals projects are planned.”

The report found that more than half the growth in jobs will occur in Western Australia, Queensland’s minerals industry labour force will grow by 50% and South Australia’s demand for minerals workers will more than double.

The minerals industry already employs 128,000 people directly, with more than 200,000 people employed indirectly in related industries.

The latest ABARE figures show that the industry is set for further expansion with a record A$70.5 billion committed to 97 projects either under construction or in an advanced stage of planning and a further 244 projects planned.

While welcoming the report’s findings, Hooke sounded a note of caution. “The report’s findings will place added pressure on an already tight labour market, particularly in the skilled and professional areas of employment. The labour market is already running at capacity and this extra demand will mean it is even more critical that Australia’s chronic skills shortages are addressed. While the Minerals Council welcomes recent Federal Government initiatives to increase the number of skilled training places and streamline temporary visa applications for skilled immigration, more must be done to expand and reform the vocational education and training system, lift funding for earth science courses in the higher education sector and further increase skilled migration. We must make sure that we are able to fully capitalize on the opportunities for all Australians presented by the enormous growth in global demand for minerals and energy.”