12 September 2014
Max Mason
Sydney Morning Herald
Mining magnate Gina Rinehart is urging the Australian government to cut red tape as the mining sector grapples with iron ore prices plummeting to a five-year low.
The steel-making ingredient has fallen nearly 40 per cent this year and many of Australia’s miners are struggling to match the fall in price with cost cuts.
Mrs Rinehart singled out red tape, approvals and burdens as addressable bureaucratic policies.
“Each one of these adds costs and makes it harder to compete successfully, risking Australian jobs and revenue,” Mrs Rinehart told The Australian.
“The government needs to better recognise this and world conditions, including various falling commodity prices and the contraction in jobs in Australia’s mining and related industries – and urgently cut bureaucratic burdens.”
The government needs to act to help reduce the costs placed on Australian miners, who are disadvantaged against international competition, Mrs Rinehart said.
“Falling commodity prices are not only forecast to continue but the government also needs to recognise the extra pressure new projects in low-cost Africa will bring should minerals from Guinea and/ or other African countries be exported as planned.”
Mrs Rinehart has previously warned that Africa is a much cheaper investment option, with workers willing to take jobs for $2 per day.
It was estimated at the time that while Mrs Rinehart was talking about pay rates for African workers, she was earning $600 a second.
The price of Australia’s most valuable commodity is unlikely to rebound significantly, Goldman Sachs analyst Christian Lelong said.
“Producers and investors have enjoyed a long period of supply tightness, cost inflation and above trend profitability; in our reports we have referred to this period as the Iron Age,” Mr Lelong said.
“In our view, 2014 is the inflection point where new production capacity finally catches up with demand growth, and profit margins begin their reversion to the historical mean; in other words, the end of the Iron Age is here.”
Project cancellations are likely as producers focus on cost cutting, Macquarie Securities analysts said.
“We expect all producers to embark on more aggressive cost cutting regimes in order to bring the respective businesses back towards break even, however only Mount Gibson, BC Iron and Grange Resources are in a position to weather the current storm of weak prices due to healthy balance sheets,” Macquarie analysts said.
Courtesy of The Sydney Morning Herald