Analysis of Australian Iron ore industryThe Ore Wars - The Australian Iron Ore Industry

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Abstract

Five Force Analysis of Iron Ore Industry

According to a research conducted by Lucintel, a global consulting the iron ore industry is

predicted to reach US $379 growing at a CAGR of 9.9% by 2018 (Lucintel, 2013). After

analyzing global market trends, it was found that though the market seems to be declining in

the period of 2012-14, it is expected to catch up due to recovering demand for iron ore in the

emerging economies. The fives forces in the iron ore industry are as follows:

• Bargaining Power of Buyers – Consumers prefer the long term contracts for a

consistent quality grade of iron ore at reasonable prices. Besides the fact that, there

has been great demand from emerging economies like India and China, who are

undergoing rapid industrialization. The number of sources is limited whereas the

demand is huge, leading to a misbalance between the two.

• Bargaining Power of Suppliers – There is a dearth of highly skilled labors for the

iron ore industry leading to an understandable increase in their bargaining power. Iron

ore operations are cost intensive, which is even more noticeable in lower grade iron

ores.