Abstract

Steelmaking relies on iron ore and metallurgical coal as main ingredients, the trade of which is hypothesized to theoretically change in tandem. However, strong correlation is not evident in historical trade prices of steelmaking inputs. To determine causes to this occurrence, the market factors that influence the Australian iron ore and metallurgical coal industries were studied. Data was collected over the past decade for worldwide resource production and trade quantities of crude steel, iron ore, and metallurgical coal. The data was analysed to reveal trends, allowing examination of the macroeconomic trade of metallurgical coal and iron ore with relation to worldwide and country specific steel production. It was determined that the influential growth of China’s steel production has spurred the growth of worldwide iron ore demand, which was met with increased production and supply, from Australia. The increased metallurgical coal demand has been met with increased production within China locally. Measures of supply elasticity were created for worldwide iron ore and metallurgical coal trade, where comparisons between Australia’s industries to the relevant greatest competitor were examined. The results, along with respective resource production data, highlighted the elevated competitive position that Australian iron ore producers enjoy compared to metallurgical coal producers. Trade characteristics revealed the different market structures that iron ore and metallurgical coal industries operate in, prompting a discussion of the effects these markets have on the two Australian industries. View Full-Text