WESTERN AUSTRALIAN RESOURCES INDUSTRY CONTINUES ITS PHENOMENAL GROWTH

In 2006–07 the estimated value of Western Australia’s mineral and petroleum industry reached $53.4 billion.  This represented a 25 per cent ($10.6 billion) increase compared to the previous financial year.  The record result was achieved through strong overseas demand (particularly from China) for mineral and petroleum commodities, pushing resource prices well above forecast levels.  When analysing this outcome it needs to be considered in the context of a 5.2 per cent strengthening of the Australian dollar against the US dollar, adverse weather conditions in the first quarter of 2007, plus ongoing difficulties with equipment supplies and skills shortages.

Accounting for most of the increase in value was nickel, iron ore and petroleum.  These three industries accounted for around 75 per cent of the total value of $53.4 billion for 2006–07.  Almost level-pegging for first place are petroleum and iron ore at around 30 per cent each with nickel at 15 per cent of the overall value. Not all commodities recorded increased output levels, notably nickel, gold, diamonds and coal.

Petroleum is the largest resource sector by value and an increase in sales of $1.6 billion saw it reach a record level of $16.4 billion.  This was chiefly due to continued high world oil prices and a sharp increase in crude oil production.

Hard on the heels of petroleum for first position is iron ore and this giant of the minerals industry sold a record 258 million tonnes in 2006-07, valued at $15.8 billion, an increase of six per cent and 24 per cent respectively.  With mine and port expansions, proposed new developments and anticipated continued strong demand, it is expected that this sector will continue its record-breaking run well beyond 2007-08.

By far the most outstanding performer in dollar terms is nickel, valued at $8 billion, increasing an astounding 110 percent ($4.2 billion) over the previous financial year.  Sales quantities actually dropped 5 per cent from 2005–06 to 174 thousand tonnes.

Next in order of value to the State is alumina, with a sales value of $4.8 billion (an increase of some 17 per cent compared to the previous period), followed closely by gold at $4.1 billion, up 10 per cent.

The base metals sector also performed particularly strongly with high prices helping to record a 71 per cent increase and reach a total of $1.7 billion worth of sales.  Diamonds sales were down, recording a 3 per cent decrease, to 4.8  million carats and salt sales of an estimated $228 million, were a little over 7 per cent down compared to the previous period.

It is expected that the strong demand for the State’s resources by Western Australia’s trading partners will continue through 2007–08 and beyond.

Some additional salient indicators of Western Australia’s significance in the national resource industry are that the State accounts for:

•    approximately 50 per cent of Australia’s total value of mineral and petroleum sales (based on a DoIR and ABARE published data)
•    69 per cent of Australia’s oil and condensate production (based on published data by ABARE); and
•    31 per cent of Australia’s total merchandise exports in 2006 (sourced from ABS).

HIGHLIGHTS IN 2006–07

Iron ore is now the largest individual mineral sector by value, accounting for 30 per cent of the value of resources output for 2006–07.  On the back of a 19 per cent increase in prices effective April 2006 and strong demand, particularly from China, iron ore reached a record sales value of $15.8 billion in sales, based on 258 million tonnes of ore.  A further price increase, effective April 2007 of some 9.5 per cent further added to iron ore’s record.

The Tapis oil price peaked in August at US$82.19/bbl and averaged US$69.09/bbl during the 2006–07 financial year.  Increased output of crude oil resulted in a 30 per cent rise in quantity to reach 91 million barrels and a 28 per cent increase in value of crude oil to realise $7.6 billion.  With the majority of fields showing decreased output due to maturity, the Enfield and Wanaea fields accounted for most of the increase.  Crude oil and condensate is the second most valuable individual commodity.

Leap-frogging alumina and LNG to hold third place is nickel, the star of the 2006–07 year, contributing $8 billion (an increase of 110 per cent over the previous year) to the total value of the State’s resources.  At the same time sales quantities for nickel dropped by five per cent to 173 686 tonnes.  Nickel prices peaked in May 2007 reaching a new record of US$54 200 per tonne (US$24.58 per lb).

Alumina’s steady performance over the years continued through 2006–07 to claim fourth place behind nickel.  A modest output increase of four per cent resulted in a record 12 million tonnes being shipped and a respectable 17 per cent increase in the value of sales to reach $4.8 billion.

LNG sale volumes rose by five per cent to realise a record of 12.2 million tonnes (210 shipments) whilst sales values dropped by around eight per cent to $4.2 billion.  This makes LNG the fifth most valuable individual commodity in the State.

Gold output dropped slightly during 2006–07 by nearly six per cent to five million ounces (156 675 kg) and remains well below the peak output levels achieved in the late 1990s.  This sector remains in sixth place behind LNG with a value of $4.1 billion (up ten per cent).  Strong gold prices continued throughout the year and were up by 21 percent in US$ terms and up by 15 per cent in A$ terms. In May 2006 gold achieved an all-time record in Australian dollar terms of $933.20/oz.

Base metals joined the record breakers by achieving a value of $1.68 billion for the 2006–07 period (a 71 per cent increase).  This was achieved through strong commodity prices together with increased output from producers.  All base metal sectors performed well, with copper increasing in quantity by 38 per cent, recording 112 280 tonnes, while value increased by 70 per cent to $952.6 million.  Zinc sales increased 17 per cent to reach 129 276 tonnes and record a value of $618.9 million whilst lead quantities dropped three per cent  to 56 927 tonnes, valued at $112 million, up 30 per cent.

LPG butane and propane also enjoyed an output increase of three per cent, returning a sales value of $605 million, down eight per cent.  Natural gas increased in quantity sold by nearly 13 per cent and an increase of 31 per cent in value to reach a record of $919 million.

In line with the nickel industry’s lower output, cobalt sales volumes were down some three per cent, however price increases saw the sale values rise by around 51 per cent to $279 million.

Salt tonnages were down by seven per cent to a just over 10 million tonnes however values remained almost static at a little over $10 million.  Diamonds sale volumes fell by nearly 38 per cent to around 18 million carats.  Mineral sand sale values increased an estimated eight per cent to reach $931.

Coal output and sales revenue were both down by around ten per cent due to changes in the overall use of coal for power generation in Western Australia.

The State’s resources in order of value for 2006–07 are:

• Iron Ore    $15.75bn
• Crude Oil and Condensate    $10.59bn
• Nickel    $8.00bn
• Alumina    $4.82bn
• LNG    $4.24bn
• Gold    $4.09bn
• Others    $5.93bn