Iron ore has done more for Australia’s economy than almost any other product. Here’s why one rust-coloured rock matters so much, and why its price is closely watched in Canberra.
Iron ore is a rock rich in iron, which is processed into steel. Steel is used in buildings, bridges, cars, ships and machinery, which makes iron ore one of the most important commodities in the world.
Australia is the world’s largest exporter of iron ore, and it’s the country’s most valuable export. Most comes from the Pilbara region of Western Australia, where BHP, Rio Tinto, Fortescue and others run huge mines, linked by rail to ports such as Port Hedland and Dampier.
China’s role
China is by far the biggest buyer. It makes around half the world’s steel and imports roughly three-quarters of the world’s seaborne iron ore. Most of Australia’s iron ore goes to China.
That means demand for Australian iron ore rises and falls with China’s construction and manufacturing industries. China’s property boom drove huge demand for steel for two decades, and its property slowdown in recent years has weighed on demand.
The price
Iron ore is priced in U.S. dollars per tonne. Prices have swung wildly, from below US$40 a tonne in 2015 to above US$200 in 2021.
In October 2026, the price fell to around US$91 a tonne, a two-year low, as China’s steel output weakened and new supply came onto the market. The Federal Government’s resources forecasters expect prices to keep easing in coming years.
Why it matters to the economy
Iron ore earned Australia about $123 billion in export income in the 2025-26 financial year, according to government estimates.
It’s a major source of tax revenue. When iron ore prices are high, mining companies pay more company tax and royalties, which can quickly improve the federal and Western Australian budgets. Treasury’s budgets usually assume prices will fall, so a sustained high price often produces a “windfall”.
It also supports thousands of jobs, and the profits of BHP, Rio Tinto and Fortescue, which are among the most widely held shares in Australian super funds.
The challenges
The biggest new source of competition is Simandou, a huge iron ore project in Guinea, in West Africa, backed by Rio Tinto and Chinese companies. It began exporting in 2026 and is expected to become one of the world’s largest sources of high-grade ore, giving China an alternative to Australian supply.
Steelmaking is also a major source of carbon emissions. As the world moves towards greener steel, Australian producers are exploring ways to process more ore locally using renewable energy, although that remains costly.
