Photographer: Nelson Ching/Bloomberg

Australia Positioned to Withstand Resources Drop, Minister Says

  • Proximity to Asia, falling currency add to competitiveness
  • Commodities indispensable to global growth and progress

Australia’s proximity to Asia coupled with a falling currency and low mining costs will strengthen its global competitiveness and help it weather the resources downturn, Josh Frydenberg, resources minister, wrote in a column in the Australian newspaper Saturday.

More than three-quarters of Australian iron-ore production is in the bottom half of the global cost curve, allowing producers to tide over low points in the pricing cycle, Frydenberg said in the column. The free trade deal with China will also reduce tariffs on the nation’s commodity exports, with a potential deal with India also beneficial, he wrote in the newspaper.

Prices of metals to energy have extended losses this year after a rout in 2015 on concerns that growth is slowing in China, slashing the market value of leading miners including BHP Billiton Ltd. and Rio Tinto Group. The decline has come even as the amount of commodities including iron ore, Australia’s biggest export earner, have increased.

Even with the turbulence in markets, volumes are up and prices will rebound over time, and investment continues ­albeit at a slower pace, Frydenberg wrote in the paper. The outlook for Australian resources is largely positive, and resources are indispensable to global growth and progress, he said in the column.

Australia is the world’s largest iron-ore exporter, shipping ore worth A$66 billion ($45 billion) in 2014, Frydenberg wrote. Cargoes from Australia will probably climb to 868 million metric tons this year from 767 million tons in 2015, Australia’s Department of Industry, Innovation & Science, said last month. The nation is also poised to take over from Qatar as the biggest exporter of liquefied natural gas by 2020.

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