Stronger Aussie dollar to benefit industry

A stronger Australian dollar may stimulate the Australian mining industry by increasing optimism on the global economy, according to an industry analyst.

The Australian dollar has risen to its highest level against the US since October last year, trading at US $0.74 yesterday after strong gains on US housing and equity markets. IBISWorld business industry analyst Sam Ellis told MINING DAILY the stronger dollar may increase global demand for commodities by boosting confidence in the economy.

“A stronger and more stable market is likely to push more people to invest in global commodities, which may deliver a range of benefits to Australia’s resources sector,” he said.

“Australian coal miners, LNG producers, and anyone who exports fuel-related commodities on the global market is likely to benefit.”

However, iron ore producers may not be so lucky, with many contracts with Chinese and Japanese investors not to be finalised until 30 June.

“Iron ore producers who are not currently in fixed-price contracts may see Asian investors try to drive iron ore prices down even further as the dollar gains strength,” he said.

According to Ellis, Chinese buyers are looking to drop iron ore prices up to 50% from last year’s prices because of a drop in global demand.

While iron ore producers may lose out, Ellis said the stronger dollar is likely to flow through to other Australian markets and benefit the wider industry and economy.

“Renewed optimism in the market will prompt more people to invest in the Australian market and deliver wide-spread benefits,” he said.

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