This is a good and bad read. Good: it points to long term high i/o prices (possibly 5-6years), bad: skilled labour shortages.
Interestingly, the WA government budgeted a $104US for i/o for 20/21 (well that too is out the window)
Iron ore price surge drives warning over labour shortageBy Kenith PngPosted 6hhours ago, updated 1hhour ago Mining-tech firm IMDEX's chief executive Paul House says the iron ore price is driving demand for labour.(Supplied: IMDEX)ShareIndustry and analysts have warned Western Australia could face a shortage of skilled workers to keep up with demand in the mining sector as the price of iron ore soars to eye-watering highs.Key points:Iron ore prices reached a record-high $US215 dollars per tonne on MondayMining royalties could surpass taxation as a government revenue source in WADiplomatic tensions have not affected China's demand for Australian iron oreIron ore prices started the week with a record high of $US215 per tonne on Monday, before punching new records during the week to reach around $US240 a tonne, which is more than double WA Treasury's mid-year revised 2020–21 iron ore price assumption of $US104.ANZ senior commodities analyst Daniel Hynes said Chinese infrastructure projects were boosting the demand for the ore, which it mainly imports from Australia.Mr Hynes expected the increase in demand for the commodity to support the wider state economy, creating demand for skilled workers."The Rios and BHPs and Fortescues are really trying to push as much material out as possible at the moment," he said."We would expect to see demand not only of blue-collar workers but also specialised and technical jobs, as well as those companies really trying to drive efficiencies higher and thus output."Western Australia recorded the second-lowest March unemployment rate of all states and territories, at 4.8 per cent.Preliminary vacancy rate data showed a drop in job ads in WA in April, but the state recorded a 208 per cent increase since the start of the year.Business boom, labour shortageThe mining services sector is feeling the flow-on effects of the record iron ore prices, including mining technology service provider IMDEX, which employs roughly 140 people in WA across the Pilbara, Kalgoorlie and Perth.Chief executive Paul House said demand for business had been spiking consistently over the past three years and more recently as organisations and countries recovered from COVID-19 across the world."The iron ore price in particular is driving a surge in demand for labour and products," he said."Those products and labour are suffering under a number of constraints at the moment."But Mr House was concerned about labour shortages, saying the younger cohort prefered to stay in urban areas instead of working FIFO.He said there were two approaches to tackling the issue."There needs to be a shifting in pricing in the market so you can attract labour and retain them in the market," he said."The second is continued adoption of new technologies that drive efficiency and productivity."Particularly things that allow people to conduct a number of their jobs from home or urban areas, rather than having to become FIFO workers and do work on site."China still heavily reliant on WAEconomic analysts like Mr Hynes expect the WA economy to reap the short-term rewards of high iron ore prices.Despite China trying to diversify its iron ore sources in the long-term, it still heavily relies on WA for the commodity."Their reliance on the international market is huge. More than two-thirds of total iron ore consumption in that country comes from the sea-borne market," Mr Hyne said. Australia produces high-quality iron ore, with a 55-65 per cent iron concentration.(ABC News: Kathryn Diss)"Australia is a key part of that. In fact, 60 per cent of its total needs comes from Australia itself."Mr Hynes said part of China's plans involved incentivising production and investment in overseas assets, especially in Africa.But he suggested it would take quite some time for ore from those countries to reach the global market.Low trade relations not detrimentalBell Potter Securities institutional dealer Giuliano Sala Tenna said China had been "very unsuccessful" in the development of any significant iron ore assets outside of Australia.Mr Sala Tenna attributed geopolitical issues and the need for infrastructure development in African countries as obstacles for China to develop competitive iron ore production.China-Australia relationsTake a look back at some of the key diplomatic flashpoints between China and Australia in 2020, and where things might be heading in the new year.Read moreMore than 83 per cent of all WA iron ore exports were sent to China in 2019–20, according to the state government's January 2021 iron ore profile."So clearly, trade relations with China are at a recent low, but they've also never done anything that's been detrimental to their own economies," Mr Sala Tenna said.Mining royalties to surpass tax revenueLatest WA Treasury estimates for 2020-21 have seen iron ore royalties surpass taxation revenue.Iron ore royalties are now valued at $9.9 billion, compared to taxation revenue which is sitting at $9.6 billion.That represents a $2.5 billion increase in what was estimated in last year's budget.Mr Sala Tenna said while the state government was benefitting from the high commodity prices, spending money during the boom was "the worst time" as it would lead to wage inflation."The difficult thing is living in a society where we have a short-term election cycle," he said."What we should be doing is actually repairing our balance sheet and putting the money away for lesser days, but typically no government wants to pass the next government a big surplus."Iron ore prices 'once in a generation'Former WA commissioner to China Stuart Crockett expected high iron ore prices to be finite, possibly lasting five to six years."It's once in a generation," he said."Even if it's 10 years, there definitely will be a time when prices come down."Mr Crocket said it was critical to use the revenues generated from increasing iron ore prices to expand the mining industry and diversify the economy.He said he was confident there would be more opportunities within WA's economy after that time."China is also the biggest exporter of steel in the world," he said."So they're processing our iron ore, creating steel for their own infrastructure and then exporting it around the world," he said."For Western Australia, it's a really, really big deal."Posted 6hhours ago, updated 1hhour ago
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