Part IV
Growing Australia in the Indian Ocean region – mineral exports, mining,
trade and tourism
From the view of Australia's own assets, the Indian Ocean
rim presents a number of opportunities and challenges:
- In mineral export terms, the Indian Ocean rim includes current
and future markets, competition, and investment opportunities.
- Australia's trade relationship with the Indian Ocean rim was the
subject of some discussion in evidence presented to the committee—particularly
on how Australia could take the opportunity afforded by its time as chair of
IOR-ARC to reassess its approach to trade in the region.
- When it comes to tourism, Australia can view the Indian Ocean rim
as both a potential market (particularly those countries with a growing middle
class) and competition (especially with Australia considered a long-haul
destination). This situation is captured in Tourism Australia's 2020 white
paper.
The committee examines these opportunities and challenges in
the following chapters.
Chapter 12
Mineral Exports and Mining in the Indian Ocean rim
...however, mining is
not simply about digging holes.[1]
Introduction
12.1
A number of countries in the Indian Ocean rim are significant producers
of major minerals, oil and/or gas. Iran is the world's fourth largest and the
United Arab Emirates eighth largest producer of crude oil (Saudi Arabia is
number 2). Australia is the largest producer of iron ore, zircon, rutile and
bauxite, in the top three producers in the world of zinc, nickel, gold and
uranium and a significant producer of hard coal and copper. Over the past
decade Australia has held an average market share of 34 per cent of the global
iron ore, 18 per cent of the global thermal and 58 per cent of metallurgical
coal trade. Australia is expected to become the world's largest liquefied
Natural Gas (LNG) exporter by 2016.[2]
Indeed, Australia's trade of LNG is projected to quadruple.[3]
12.2
South Africa is the second largest producer of zircon and rutile and a
major producer of gold, hard coal and iron ore. India is the third largest
producer of iron ore and also a significant producer of zinc, hard coal,
bauxite and crude oil. Indonesia is the second largest producer of nickel and a
significant producer of crude oil, natural gas, hard coal, zircon and gold.[4]
In 2012, Malaysia and Indonesia were the world's second and third largest LNG
exporters while Tanzania and Mozambique are rapidly emerging suppliers of this
commodity.[5]
12.3
In this chapter, the committee outlines the nature and extent of
Australia's trade interests in the Indian Ocean rim, as they relate to
Australian commodities. The committee considers the nature of competition and
synergies evident in the Indian Ocean rim, relative to Australia's mineral
exports.
Australia's mineral exports to the Indian Ocean rim
12.4
Australia occupies a unique place in the Indian Ocean rim in regard to
mineral resources and trade. Regions within Western Australia and the Northern
Territory have vast quantities of mineral and energy wealth, and contain mining
development and export hubs for a number of Australia's major extractive
industry ventures.[6]
New South Wales and Queensland are established and major exporters of coal. Assuming
that robust demand from the emerging economies such as China and India
continues, the volume of Australian mineral exports is expected to grow with
iron ore, coal and LNG in particular projected to increase substantially.[7]
The main export markets for Australian minerals are in order of importance:
China, Japan, India, South Korea, United Kingdom, Chinese Taipei, and
Singapore.[8]
12.5
According to DRET, in 2011 Australia exported $26.7 billion worth of resources
and energy products—mostly metallurgical coal, petroleum, gold and copper—to a
small number of Indian Ocean rim countries.[9]
India was the single largest Indian Ocean rim destination for both Australian
fuel and minerals at $9.5 billion (6 per cent of Australia's total fuel and
mineral exports for that year) including $7.2 billion of Australian coal and
$1.4 billion worth of copper ores and concentrates respectively.[10]
Singapore was the second largest destination for fuels and mineral exports in
the Indian Ocean rim.
12.6
The three largest resource exports to the Indian Ocean rim from
Australia are bituminous coal (metallurgical and thermal) ($8.1 billion), crude
petroleum oils ($5 billion), and copper ores and concentrates ($1.45 billion).
Iron ore
12.7
Australia and India are among the largest iron ore producers in the
world, with Australia at no. 1 and India no. 3. South Africa is also a
significant producer of iron ore but its production is only a fraction of
Australia's and less than one quarter of India's.[11]
12.8
The Bureau of Resources and Energy Economics reported that to 2025 China
is expected to increase its consumption of iron ore to support expanding steel
industries.[12]
It noted that China's iron ore imports are projected to grow strongly from a
relatively large base at an average annual rate of 4.5 per cent to reach 1,193
million tonnes in 2025. India has 'relatively large reserves of high quality
iron ore and, despite projected strong growth in iron ore consumption, it is expected
to remain a net exporter of iron ore over the short and medium term'.[13]
Even though India's substantial deposits of high quality iron ore will support
the growth of India's iron and steel industry:
There is some uncertainty as to whether India's status as a
net exporter of iron ore will continue through the second half of the outlook
(to 2025). In particular, India's exports of iron ore will be negatively
affected by government policy aimed at ensuring sufficient iron ore supply for
domestic steel producers. Consequently, there is potential for India to become
an importer of iron ore, particularly after 2020.[14]
12.9
Western Australia accounts for 97 per cent of Australia's iron ore
production most of which is exported to Asia with China taking 70 per cent of
Australia's iron ore exports and Japan and Korea importing most of the balance.[15]
The Pilbara region in north west Australia produces the bulk of iron ore.
Indeed, during its visit to the Pilbara, the committee inspected the Rio Tinto
site at Dampier Port located adjacent to the landside areas of the port. Here non-stop,
trains up to 2.5 kilometres long deliver iron ore extracted from its 14 mines
throughout the Pilbara. In a single day and under a highly automated system, 24
trains or so off-load the iron ore at the port ready for export.
12.10
Iron ore makes up about 50 per cent of the value of bulk exports leaving
this port. In the past 12 months, 871 iron ore bulk carriers, some up to
246,000 gross registered tonnes, transited the port en route to destinations in
the Asia-Pacific region.[16]
12.11
The iron ore also leaves Australia through Port Hedland and Cape Lambert.[17]
During the committee's visit to the Pilbara, it also toured Port Hedland, which
is the world's largest bulk export port and continues to grow. In financial
year 2011–2012, the Port Hedland Port Authority delivered a year of
record-breaking activity by shipping 246.7 million tonnes, an increase of 23.9
per cent from the previous year. On one occasion, the port shipped 1.04 million
tonnes in six vessels on a single tide—'a landmark performance' giving further
confidence that the target of achieving 495 million tonnes per annum is
within sight.
12.12
Of the total of 246.7 million tonnes leaving the port, iron ore
accounted for 238.9 million tonnes.[18]
The Port Hedland Authority informed the committee of the proposed developments
in the harbour vicinity and the anticipated significant increases in the export
of bulk commodities from the port.
12.13
The sheer amount and value of the exports leaving from the Pilbara highlight
the importance of safe passage of these commodities through the Indian Ocean.
Iron ore being
mixed prior to shipping.
Thermal coal
12.14
World demand for thermal coal is projected to increase based on the assumption
that robust economic growth would continue in emerging economies particularly
China and India. There are four major coal producers in the Indian Ocean rim.
In world ranking for thermal coal: Indonesia rates no. 1; Australia no. 2; South
Africa no. 5 and India no. 15. Currently, Australia, Indonesia, South America,
Russia and Southern Africa dominate global exports of low-grade, or thermal
coal. Although Australia, Indonesia and South Africa are Indian Ocean rim
countries, the majority of global trade of this commodity does not pass through
the Indian Ocean rim.[19]
12.15
Indonesia is expected to remain Australia's largest competitor in
thermal coal markets due to its large reserves and its considerable freight
advantage over Australian producers into Asian import markets.[20]
In 2006, Indonesia exported more thermal (low-grade) coal than Australia,
making it the world's largest exporter of this resource.[21]
Given its geographic proximity to Australia, a developing relationship in terms
of resource development and trade is a priority. South Africa's export of
thermal coal is 'unlikely to pose a significant threat to Australia's market
share'.[22]
12.16
Although India produces thermal coal, most of its electricity demand and
associated electricity generation capacity is located in coastal regions
removed from the main coal producing regions, resulting in high transport
costs.[23]
Metallurgical or coking coal
12.17
Along with the United States and Canada, Australia is a dominant force
is the global export of high-grade, metallurgical or coking coal. According to
DRET, Australia currently accounts for over 50 per cent of the world trade in
metallurgical coal.[24]
Australia produces high quality metallurgical coal and substitutes for this
grade of coal in steel production are very limited.[25]
12.18
With regard to the production of metallurgical coal: Australia ranks no.
1 in world ranking; Indonesia no. 6; South Africa no. 8; and India no. 12. Around
80 per cent of Australia's metallurgical coal is exported.[26]
The Bureau of Resources and Energy Economics noted that because of its geographic
position, Australia has an advantage over other established exporters, such as
the United States, Canada and the Russian Federation, in supplying
metallurgical coal to rapidly developing Asian economies. Most of the coal
production comes from New South Wales and Queensland and is exported through
four ports along the east coast from Port Kembla in the south to Abbot Point
north of Mackay in Queensland.[27]
12.19
India has a large and growing demand for metallurgical coal. Although
endowed with coal reserves, India has low capacity for coal production, due to
internal infrastructure issues and a limited supply of high quality hard coking
coal making the country highly reliant on imports.[28]
In 2011, Australia exported 28.9 million tonnes of metallurgical coal to India,
accounting for 22 per cent of all Australian exports of this product.[29]
According to the Bureau of Resources and Energy Economics, India's projected
increase in demand for metallurgical coal is expected to result in imports
increasing at an average annual rate of 8.4 per cent, to reach 101 million
tonnes by 2025.[30]
The International Energy Agency recorded that coal accounted for nearly half
the world's increase in energy consumption in the last decade, and that India
was set to displace the US as the world's second largest coal consumer after
China by 2025.[31]
Its forecast indicates that Indian imports of coal are expected to grow to
about 56 million tonnes by 2016.[32]
12.20
Australia would be expected to be favourably placed to meet much of this
growth, although Mozambique, a major emerging coal-producing economy, would be
expected to become a significant supplier to India by 2016.[33]
Indeed, Mozambique is expected to emerge as a major competitor in the
metallurgical coal export market along with the established and dominant
exporters, the United States and Canada.[34]
New projects are being developed in the northwest of Mozambique and projects
recently completed or under construction are expected to support increased Mozambique's
coal exports.[35]
Major infrastructure is also expanding such as the ports of Beira and Maputo,
which are currently under construction along with construction and upgrades to
existing rail links.[36]
The Australian Coal Association stated:
Australian policymakers should be alive to the fact that
Mozambique is ideally located to export to Indian coal markets at low freight
cost. In these circumstances it is hardly surprising that the Indian company,
Jindal Steel and Power, has invested US$250 million in its mine in the Changara
district and expects to start exporting to India later this calendar year. The
company expects to export 10 million tonnes per annum when the mine is fully
developed.[37]
12.21
Noting the rapid emergence of new competitors, the Australian Coal
Association highlighted the importance 'of keeping Australia a competitive
coal-exporting nation'.[38]
Summary
12.22
The Bureau of Resources and Energy Economics outlook to 2025 indicates
that Australian exporters of thermal and metallurgical coal will face
competition from a number of exporting countries including Indonesia which is
anticipated to be Australia's main competitor for thermal coal exports. South
Africa is a major exporter of coal, historically to Europe; however indications
are that India is likely to emerge as a growth export market.[39]
Mozambique is also a likely competitor. Even so Australia is expected to
maintain its strong market share of metallurgical coal trade because of its
quality.[40]
There is no place for complacency, however, and as noted by the Australian Coal
Association, Australia must continue to strive to maintain its competitiveness
with the increasing number of contenders.
Gold and copper
12.23
Australia sells significant quantities of gold and copper to Indian
Ocean rim countries. Exports to India, Singapore and Thailand alone make up 29
per cent (over $7 billion) of this figure. Emerging economies in South East
Asia and India also import a wide range of other Australian minerals reflecting
rapid growth in their industrial development. For example, India matches Japan
and trails China only in the volume of copper imported from Australia.[41]
Crude oil, Liquefied Petroleum Gas
12.24
Australia is as heavily dependent on certain mineral resource
imports—notably oil and petroleum—as are many other countries in the region.
Even though, Australia was a net importer of petroleum in 2010-11, it also
exported a significant amount of crude oil and Liquefied Petroleum Gas (LPG).[42]
Much of Australia's LPG originates in the Indian Ocean adjacent to Australia's
north and western coastlines. Similarly, much of Australia's LPG transits
through the Indian Ocean rim, en route to export destinations, though only a
very small amount of this resource is exported to Indian Ocean rim nations. China
and Korea are the lead destinations although South East Asia and India are
significant beneficiaries of Australian exports.[43]
12.25
In recent years, Australia's oil production has fallen rapidly as the
Bass Strait oil fields decline. Australia's production of petroleum liquids
peaked in 2000 and has been steadily declining since then.[44]
Australia's crude oil resources are only small by world standards and are being
depleted at a faster rate than they are being replenished by discovery.[45]
Thus, without significant new discoveries of crude oil, or development of
condensate and LPG resources associated with offshore gas resources, or other alternatives,
Australia is likely to be increasingly dependent on imports for transport
fuels.[46]
LNG
12.26
The north west of Australia is also an important producer of Liquefied
Natural Gas (LNG). Indeed, the largest proven gas reserves in Australia are
located in the Carnarvon Basin in north west of Western Australia with the
Browse Basin and Bonaparte Basin also having large reserves.[47]
In recent years up to 20 million tonnes of Australian LNG per annum have been
extracted, from the North West Shelf off the West Australian coastline and
Darwin projects. LNG extraction is expanding rapidly with new projects in
existing regions and Queensland expected to increase production to 81 million
tonnes by 2017.[48]
Ninety-six per cent of Australia's significant output of LNG is exported to
North Asia—Japan, China, Korea and Taiwan.
12.27
Malaysia and Indonesia are two of the world's most significant LNG
exporters serving the key markets of Japan, China, Taiwan and South Korea. Indonesia
is a major competitor for Australian natural gas exports.[49]
But, according to the Bureau of Resources and Energy Economics, they have
relatively small reserves and over the past ten years their reserves to
production ratio has been declining. It noted that this trend 'reflects an
inability to add to existing gas reserves and relatively strong growth in
domestic gas consumption'.[50]
The Bureau's outlook also noted that Iran and Yemen have substantial reserves,
but 'the perceived high likelihood of continued political volatility in the
region is expected to constrain investment in LNG production capacity'.[51]
Mozambique and Tanzania are two emerging producers.[52]
12.28
The Australian Petroleum Production and Exploration Association noted
the potential supply competition from established producers such as Qatar,
Yemen, Oman the United Arab Emirates, Malaysia, Brunei and Nigeria and from new
entrants Nigeria, Angola and PNG. It also drew attention to the growing
excitement about recent large gas discoveries in Keyna, Mozambique and
Tanzania. For example, an estimated 100 trillion cubic feet of recoverable gas
reserves have been discovered in Mozambique and Tanzania since mid-2010. In
addition, 'a whole new source of competition is emerging as access to different
forms of unconventional gas increases'. It reported:
Shifts of this nature, the entry of new LNG producers in
North America and East Africa, and the potential rise of unconventional gas in
the longer term, could have significant implications for the Australian LNG
industry's prospects. With Australia likely to become the largest LNG supplier
to Asia accounting for around 35 per cent of the market by 2017...LNG buyers may
seek to diversify their sources of supply and shift attention towards new
projects.[53]
12.29
Thus, Australia faces competition from numerous other sources even with
a commodity where demand is strong, world-wide and increasing, for which Australia
has an established, growing market, and is in a major expansion phase. These
new developments mean that both government and industry must be vigilant about
maintaining Australia's reputation as a secure, reliable and cost-effective
supplier of LNG.
LNG tanker in the background; iron ore stored in piles
in the foreground.
Uranium
12.30
Uranium is expected to become a major export commodity for Australia in
coming years.[54]
It is very much the sleeping giant of Australian export commodities, as
extensive markets are expected to emerge in the Indian Ocean rim after 2020.[55]
Asia has recently overtaken the US as the largest regional market for
Australian uranium exports. Australia is well placed to benefit from growing
demand due to proximity to growth markets and resource abundance. Market growth
is forecast to occur in non-OECD countries and Australia has the largest supply
of recoverable uranium resources in the world.[56]
12.31
It should be noted that Australia's ability to meet market needs is
dependent upon Government uranium mining and export policy. This has always
been a controversial area in public policy, due to environmental and public
health concerns over the safe use and disposal of uranium. The Australian Government
is currently considering a change in policy to enable exports of Australian
uranium to India, subject to negotiation and ratification of a bilateral safeguard
agreement.[57]
Mr Bryan Clark from the Australian Chamber of Commerce and Industry
(ACCI), was of the view that supplying uranium to India would 'unlock a number
of doors in our relationship with India' and would also assist India with a
low-carbon technology.[58]
12.32
Australia is also finalising a bilateral safeguard agreement with the
United Arab Emirates (UAE) to supply uranium for future UAE energy needs.
Vietnam, Malaysia, Bangladesh and Thailand have also stated their intentions to
use nuclear energy.[59]
Future growth
12.33
Many Indian Ocean rim countries are beginning to industrialise,
resulting in an increased market for energy resources and metals.[60]
DFAT noted that:
Many of the Indian Ocean rim economies continue to enjoy
significant levels of growth. Rapid industrial development and increasingly
affluent domestic markets are helping to fuel growing demand for Australia's
resources and food exports. Australia's comparative and geographic advantages
ensure it is well placed to continue to capitalise on these trends.[61]
12.34
Future Directions International also highlighted the increasing
potential in the Indian Ocean rim, with its 'developing wealth, increasing
population, evolving trade and shipping capabilities'.[62]
This rapid growth presented Australia with great opportunities and will
continue to have an important place in Australia's future. Professor Raghbendra
Jha, from East Asia Bureau of Economic Research, noted that there is going to
be 'a great push from India and several other countries for getting energy
related resources', which is another area of potential complementarity.
Australia, however, as a very significant producer and exporter of natural
resources, will also face competition from Africa, where India has now started
to invest quite heavily and, secondly, with Central Asia. There are important
synergies and complementarities between developments in the Indian subcontinent
and developments in Australia.[63]
12.35
Overall, according to Future Directions International, the Kimberley and
the Pilbara regions' strategic share of iron ore, gas, base metals and uranium
means sustained growth and contribution to Australia's national GDP. This
development is expected despite market volatilities and new competing sources
of commodities. Putting the possibility of market volatilities aside, Indian
Ocean economies were projected to continue to expand and demand more materials
and energy supplies from Australia. Large and accessible known deposits will
sustain current production levels for the coming decades with the potential to
further extend supply through ongoing exploration and technological advances
and investment.[64]
12.36
Thus, while there are synergies with growing demand from the Indian
Ocean rim, there are also Indian Ocean rim countries that compete with
Australia in the export market.
Competition and investment
opportunities
12.37
As stated earlier, many Indian Ocean rim countries will increase their
consumption of resources exponentially in line with development. Austrade referred
to a macro-economic trends forecast for the Indian Ocean rim identifying rapid
growth in industrial and economic development, fostering associated growth in
affluence and consumption.[65]
It is this growth in consumption from the Indian Ocean rim that stands to
benefit the Australian economy, particularly with regard to exports of mineral
and energy resources. Opportunities will also be present in terms of foreign
investment diversity, particularly with regard to Australian mining interests
and associated industry.[66]
However, these opportunities will be matched by intense competition around
energy supply and demand.
12.38
Analysts forecast increased competition for Western Australia resources
in the decades ahead as new competing sources of commodities emerge,
particularly in Africa.[67]
Although Australia is a major player in the region at the moment, in terms of
resource exports and mining and extractive industry expertise, careful
strategic planning is needed to consolidate and grow this position of strength
for Australia's ongoing economic benefit. Specifically, in regard to Australia's
coal exports, the Australian Coal Association noted:
The [Australian] trade sector is highly exposed to relentless
competition and Australia cannot afford to be complacent, as it faces strong
and increasing competition inside the Indian Ocean region from Indonesia, South
Africa and Mozambique, and outside the region from Mongolia, Colombia, the USA
and Canada (among others).[68]
12.39
It is highly likely that Western Australia will continue as a leader in
mining efficiency in the years ahead, with increased level of automation
reducing manning levels and operating costs. The Western Australian mining
sector, however, is predicated on Australia's comparatively low sovereign risk,
and, as noted earlier, it is therefore vital Australia does all it can to protect
its comparative advantage.[69]
Services
12.40
The ACCI noted that mining is 'not simply about digging holes', but also
creates demand for improved technology such as highly specialised mining
equipment and services associated with mining.[70]
According to ACCI, many Australian firms are diversifying into this area to
attain 'a portion of the share market'. It stated:
Legal, accounting, project engineering, software and finance
companies are all building specialist resource operations seeking resource
skills and developing designing and producing hi-tech mining equipment and
servicing support industries.[71]
12.41
The resource processing industry also 'demonstrates that there are
positive downstream effects from increased mining activity'. Australian firms
are responding to the growing demand for mining services and Australia is
'developing a cluster of internationally competitive firms based on mining
services'.[72]
The Western Australia government informed the committee that a number of
Western Australian resource companies are also active in developing resources
and servicing mining activities in Indian Ocean rim countries—including servicing
petroleum activities in Singapore or developing mines in Mozambique and
Tanzania. This area opens up opportunities not only for the large mining
companies but for small and medium enterprises. The Australian Export Finance
and Insurance Corporation (EFIC) cited the example of Gasco Pty Ltd, an
Australian combustion and processing engineering firm, which secured a US$6.5
million contract to supply equipment to the Dolphin Energy Project in the
United Arab Emirates. The contract required installing two fired heaters for
the 240km Taweelah-Fujairah gas pipeline project which involves the production
and processing of natural gas from offshore Qatar and transporting the
processed gas by pipeline to the United Arab Emirates and Oman.[73]
In respect of Africa, EFIC reported:
Africa contains 30% of the world's mineral reserves but only
five per cent of the global mineral extraction budget is allocated to African
projects. This provides great opportunity both for Africa, and Australia. More
than 220 Australian resource companies have assets in Africa—200 of these are
involved in mining. There companies account for 600 individual projects spread
over 42 countries representing over $20 billion of actual and perspective
investment.[74]
12.42
Mr Giles Nunis, from the Western Australian Department of State
Development, noted that 70 per cent of Australian mining companies in West
Perth operate in Africa, and that Australia mining companies are developing expertise
in terms of mining services and mining development.[75]
He mentioned that a lot of African companies seek mining services:
A lot of the issues they have to deal with in Africa are
predominantly around sovereign risk issues in terms of investment, and we are
certainly assisting African governments in looking at how this state of Western
Australia has been able to provide greater security for larger investments over
successive state governments. That is by way of state agreements and has been
quite attractive for African countries to have a look at. When they get through
that particular cycle, we think we can play a much larger role in Africa.[76]
12.43
Mr Nunis noted that contact was mainly government department to
government department. He explained:
The Department of Mines and Petroleum look at their
regulatory regimes, the royalty structure, safety and how the mine plans are
constructed by the industry, so we show examples of those. We frequently get
involved in the development of the state agreements that we have within the
state...what they are looking at is how they could potentially apply a similar
regime over there. We give government-to-government advice. We say, 'These are
the things that we do over here,' and they take those with them. What they do
with them we are not quite sure yet, but we have not been drawn over there to
give on-the-ground advice; they predominantly come here and seek that.[77]
12.44
The committee notes that at their 2012 meeting, the Council of Ministers
referred to enhanced connectivity that could have 'a catalytic effect on
economic integration by drastically reducing the costs of doing business'. They
recognised that the development of port and harbour infrastructure in the
region assumed critical importance and directed the Working Group on Trade and
Investment to 'explore the potential of cooperation in this sector, including
investment in and upgrading of shipping infrastructure and logistic chains in
the region' (see paragraph 3.45).
12.45
During its visit to the Pilbara region, the committee witnessed the
benefits that are accruing from the rapid introduction of advanced technology
not only in the actual extractions of minerals but in their transportation.
Much of this technology is ground breaking. For example, the committee was told
about the proposed advanced floating deck concept for Port Dampier, which involves
installing a large pontoon deck at the end of the Dampier Cargo Wharf to
provide additional berth capacity for offshore vessel tonnage. According to the
Port Authority, the concept has 'attracted considerable interest from industry,
suppliers and shipping agents'.[78]
There is also the use of highly automated machinery to transport bulk
commodities and of sophisticated software to facilitate the fast, safe,
efficient movement of vessels in and out of the harbours with enormous
potential to boost productivity. The committee even heard the term 'industry
tourism' used to describe visitors coming to the Pilbara attracted by the
mining and transportation expertise that the region showcases.
12.46
Having visited the two largest bulk export ports in the world and
witnessed the use of advanced technology to improve the productivity of the
ports, the committee believes that Australian expertise in this area could be
the catalyst to which the ministers referred. In this regard, the committee
found that the opportunities for Australian industry to build on the work being
done in the Pilbara were yet untapped and extend well beyond the export of
minerals to the complete range of services accompanying mining.
Africa
12.47
The pattern of energy supply and demand varies greatly across the Indian
Ocean rim, from crude oil abundance and self-sufficiency in the Gulf to oil
dependence in India and the opening of new reserves in Kenya.[79]
Within Africa the scope of activity and development in mineral extraction is
also very broad, with vast quantities of untapped mineral wealth attracting
global interest from foreign mining companies. This international interest
includes a large and growing Australian presence. With particular reference to
Africa, Austrade surmised that:
...most of these minerals still remain untapped due to
inadequate knowledge on their status, economic viability and appropriate mining
technologies...This sector will increasingly offer Australian firms
opportunities in mineral exploration, mining software, mining processing
technologies, mining equipment, engineering services, and mining education and
training services.[80]
Africa Down Under
12.48
Ms Sonia Grinceri, Western Australia Department of State Development, referred
to the Africa Down Under conference, which has been held annually in Perth for
the past ten years. She noted that this Austrade event has 'grown
exponentially—doubling each year' and is now the largest mining conference in
Australia and the second-largest mining conference focused on Africa in the
world, after the Mining Indaba in Cape Town.[81]
Ms Grinceri explained that the attendees:
...usually travel with very substantial government delegations
headed up by either a minister, a ministerial delegation, and a head of the
department of mines et cetera, and the various bureaucrats that fall in behind.
Then there is a great deal of interest on the part of Australian companies,
most of which are Western Australian companies. That is the configuration of
it. But I have seen an increasing number of private sector players from Africa
coming across over the years.[82]
12.49
According to Ms Grinceri, 70 per cent of Australian companies in the
resources sector are out of Western Australia and are involved in Africa. She
explained that West Perth is considered a 'little Africa' for the mining
sector, which is a growth industry. In her view, the companies have, by and
large, been the drivers of building links with the African mining sector through
their people-to-people contacts. She stated:
Our migrant population is an undervalued contributor to trade
factors, not just in this discussion about the Indian Ocean rim countries...That
is my first port of call. You need to look at the industry networks that are
associated with those countries and engage with them. They are very important,
very valuable and underestimated.[83]
12.50
Dr Hameiri described the Africa Down Under conference as 'quite a
substantial event', bringing together a lot of policymakers and business people
from both Australia and various African states. He believed that the business
community has 'a very powerful role' and that linkages were occurring on a more
bilateral rather than on a multilateral level because the multilateral
arrangement had been quite weak.[84]
12.51
Mr Jeff Hart, AAMIG, pointed to the importance of initiatives such as
the 'Africa Down Under Mining Conference'. He informed the committee that the
2012 conference attracted 28 African delegations including 18 African mining
ministers and over 2,500 delegates in total.[85]
There were 166 exhibitors and 'a full three day programme of top-notch speakers'.
Mr Hart used the example of AAMIG's interaction with Puntland, in North-Eastern
Somalia, to extrapolate the importance of the conference for its work. More
generally, the Puntland example highlighted the synergies and complexities that
exist in the interaction between corporate, state and international interests,
in the context of Australia's engagement in mining in the Indian Ocean rim.
12.52
Puntland is an autonomous region with a fragile political history that
continues to this day—its borders are still in dispute.[86]
In late 2011, Mr Hart met with a delegate from Puntland Petroleum and Minerals
agency to discuss the considerable mineral resources of the region: petroleum,
iron-ore, gold, copper, tin, titanium and gemstones.[87]
While the delegate noted the interest of individual Australian mining companies,
he also referred to the presence of Chinese and Indian foreign direct
investment mining interests active in the region.[88]
According to Mr Hart, the delegate acknowledged the enormous importance of
sustainable management of Puntland's mineral resource wealth for the long-term
benefit of the region. The delegate also acknowledged the expertise and
reputation of Australian mining companies, in that he 'would like to see more
Australian Energy companies involved in the process'.[89]
Mr Hart cited the delegate's attendance at the Africa Down Under conference, as
critical to exposing Puntland, and potentially a number of similarly placed
African regions and countries in the Horn of Africa, to the sustainable
benefits of international investment.[90]
He also emphasised the importance of this region strategically to Australia's
ongoing international resource and security interests.
12.53
The organisers expect the conference in August 2013 to be far bigger
than in 2012, 'consolidating our reputation as the best melting-pot for
business conducted between the two continents'.[91]
Investment opportunities
12.54
The largest country recipients of Australian investment in the Indian
Ocean rim resource and energy sector, in terms of the size of investments and
the number of companies involved, are South Africa, Indonesia and Tanzania.[92]
In Tanzania alone, at least 21 Australian companies are involved in 45 mining
projects.[93]
Austrade noted:
Australian firms will also see increasing opportunities to
invest and innovate in these markets to capture improvements in resource (land,
water, energy and food) productivity, as well as increasing supply of these
goods from Australia.[94]
12.55
Mr Hart sensed that the Australian mining sector, including medium-sized
and so-called junior miners tend to go where they think there are
opportunities. According to Mr Hart, historically Australian companies have had
a lot of mining investment in Africa and now in Botswana on the east coast, and
particularly countries such as Kenya where there are significant Australian
interests. He argued that, while there are some important trading relationships
including with South Africa, the mining sector was 'the first sector at the
moment in terms of Australian economic interests in Africa'.[95]
12.56
Like many who presented evidence to the inquiry, Mr Hart was firm in his
view of the fundamental importance that mining industries would play in the
development of Africa in the 21st century'.[96]
From an Australian perspective, AAMIG cited many examples of the importance of
the sector. The Australian mining industries portfolio represented over 600
projects in 42 African nations and, according to Mr Hart, the potential that
Africa offered Australia economically had only just begun to be realised. He
understood that there were about 400 companies already active in the mining
sector in Africa with more opportunities opening for Australia because it has
good competitive advantages:
Apart from the potential of up to $50 billion of Australian
mining investment projects, existing or in the pipeline—and more than half of
that is already firmly on the books—Africa, with a population of over 1
billion, already has a GDP of $1.7 trillion, larger than India or Russia's. It
is expected to grow by 6 per cent a year into the future, with consumer spending
at double the OECD average. Australia will ignore Africa at its peril as the 21st
century unfolds.[97]
12.57
He added that the opportunities were not limited to mining but that clearly
mining and mining services was 'one of the areas where we do have an extraordinary
base to build on at the moment'.[98]
According to Mr Hart:
So we need to be making sure that Australian firms are the
ones who are able to grasp the opportunities earliest and set themselves up in
the marketplace and be, as we would like to think anyway, ultimately the
dominant players and the beneficiaries of development in the countries of our
region.[99]
12.58
Dr Shahar Hameiri noted the considerable potential with mining
developments in Africa becoming operational mines and of the world-wide growing
interest in investing in Africa.[100]
He explained that this trend reflected the current very high price of key
commodities: that when prices are very high, as they are now, business and
governments develop 'initiatives to invest in areas that are far more expensive'.
He cited the seabed resources in the Indian Ocean, which 'suddenly got a lot of
interest from the Chinese government and the Indian government but also parts
of Africa'.[101]
While opportunities abound in the Indian Ocean rim for Australian companies,
especially those with much needed expertise in the mining and allied
industries, there are downsides. EFIC noted that Australian exporters must
manage 'additional political and country risks associated with some markets'.
It stated that:
...there are challenges associated with operating in these
developing countries, particularly for those placing significant investment in
resource projects which can be subject to challenges such as political
instability or civil unrest.[102]
Partnerships and Synergies
12.59
The nature of competition in the Indian Ocean rim has previously been
discussed in this chapter, as it relates to Australia's mineral resource
exports. In a general sense, submissions have indicated the importance of
Australia's mineral export trade in the Indian Ocean rim, linking this trade to
Australia's ongoing economic prospects. In terms of competition, Australia's abundant
stock in a number of resource sectors has been noted but even then competitors
are emerging.[103]
A consistent theme is that Australia needed to be mindful of the fact that
emerging resource producers in the Indian Ocean rim should be seen as export
competitors, in addition to being export markets.
Corporate Interests
12.60
By way of relevant summary, Australian Coal Association's
recommendations relating to mineral exports and strategy synergies included:
- ensuring regional energy issues are high on the agenda of the IOR-ARC;
- using other relevant bodies such as the commonwealth of nations,
the Australia-India Framework Dialogue and the Australia-India Energy and
Minerals Forum to pursue open trade and regional security; and
-
forming a subcommittee of the Council of Australian Governments
to encourage intergovernmental cooperation and consistency on Indian Ocean
policies.[104]
12.61
Speaking on behalf of the AAMIG, Mr Hart suggested that the Australian
Government's mining interests would be served by doing 'more in engaging
actively with the private sector'.[105]
The AAMIG, Australia-Africa Business Council and the Australian Uranium
Association are just a few examples of organisations that have an active and
valid contribution to make to this discourse.
12.62
There is evidence before the committee to suggest that specific
synergies are operating between Australia's mining interests and general
engagement in the Indian Ocean rim. There are less concrete examples of broader
cooperative synergies between government departments and agencies, and
corporate and non-government operatives, that incorporate the Indian Ocean rim
as a region. This approach is particularly apparent in relation to strategic
high-level outcomes that are Indian Ocean rim region-specific, relating to
mining and resource extraction and trade. Indeed, the committee's consideration
of mining activities in the Indian Ocean rim has been determined largely by its
bilateral nature or in the case of Africa with the focus on a subregion that
includes countries not within the Indian Ocean rim. The IOR-ARC makes no
mention of mining as one of its priority areas though mining could be included
under trade and investment.
Energy security:
12.63
Mr Nunis spoke of the security implications and concerns in Western
Australia, as the state with significant mining and energy projects, including multibillion-dollar
resource projects, that underpin the state and national economy. The Woodside
LNG projects of Pluto and North-West Shelf, and the Wheatstone and Gorgon
projects, exemplify the state's strong track record implementing such large
scale projects all of which add up to more than $167 billion.[106]
Sea transport security
12.64
The level of commodity trade through the Indian Ocean sea routes for
Australian producers is likely to increase in line with Australian foreign direct
investment in Indian Ocean rim resource provinces, particularly Eastern Africa
and South East Asia.[107]
As noted in the previous chapter, the Indian Ocean is a major transit route for
Australian import and export trade, within and external to the Indian Ocean rim.[108]
These shipping routes connect Europe, East Africa, East Asia and Australia and
with the economic expansion of Asia, the Indian Ocean rim becomes more
important to global trade, especially energy trade.[109]
12.65
The importance of the Indian Ocean rim for Australia's coal interests
should not be understated. Australia is the largest seaborne exporter of coal
in the world, accounting for 4 per cent of global production of this resource.[110]
Australia's export trade of this resource generated over $48 billion in revenue
in 2011-12.[111]
The Australian Coal Association notes:
The oceans—particularly the Western Pacific and Indian
Ocean—provide the essential highway which sustains this trade and contributes
to Australia's economic wellbeing.[112]
12.66
The Australian Coal Association noted in regard to the Indian Ocean that
'any major disruption to these sea lines of communication would have a
significant impact on every Australian's standard of living'.[113]
12.67
While security risks are present for all shipped energy commodities,
these risks are magnified for class 7 goods such as uranium. Indian Ocean
transit routes pose significant risks from issues such as piracy and terrorism.[114]
Both matters of security in the North West and of the Indian Ocean sea lanes were
discussed in chapter 10.
Conclusion
12.68
The committee has identified the many opportunities available to
Australia to capitalize on its already highly successful mining industry,
including in the services sectors accompanying mining activity.
Recommendation 12
The committee recommends that ministers attending the
Council of Ministers' Meeting in Perth or their representative be invited to
visit the Pilbara as part of a delegation to see the work being done at Dampier
Port and Port Hedland to improve the ports' productivity.
Recommendation 13
The committee recommends that DFAT work with other federal
government departments, as well as state and territory governments, on strengthening
government consultation with groups such as AAMIG, the Australian Coal
Association, and the Australia-Africa Business Council. The committee notes
that while Africa Down Under has been successful in generating discussion, more
concrete measures are needed to ensure that the input of groups working with
industry and African countries is captured in policy making.
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