Andrew Forrest, who became a billionaire shipping iron ore to China, now sees big opportunity in the agriculture industry in northern Australia with investment support from overseas.
“If we are truly going to develop northern Australia -- that under developed half of Australia -- then the capital required will dwarf anything that we’ve seen in the mining industry,” Forrest, the founder of Fortescue Metals Group Ltd., told reporters Thursday in Sydney.
With concern that China’s appetite for iron ore is slowing as it moves to a services-led economy, investors including Forrest and fellow billionaire Gina Rinehart are expanding into food production to tap rising Asian demand. Forrest last year acquired Harvey Beef in Western Australia to export to China.
Iron ore, used to make steel, has plunged more than 40 percent in the past year, as prices of all the main metals from copper to gold languish below their five-year averages. Live cattle is one of the few commodities trading above that average.
Rinehart, the richest woman in Australia and the world’s 10th richest overall, last year bought stakes in two ranches in Western Australia and announced a A$500 million ($367 million) investment in Queensland to supply infant formula to China.
The benchmark import price of iron ore in China has whipsawed in 2015, tumbling to a then six-year low in April on rising supply and stalling demand growth, before rebounding the same month. It’s fallen since to a new low, and rallied again.
Fortescue Chief Executive Officer Nev Power said last week that the miner is capping its shipments as the market is fully supplied. Goldman Sachs Group Inc. and Citigroup Inc. are among banks forecasting further losses for iron ore.
“The iron ore and minerals industry has a fantastic and permanent future,” Forrest said. “The world needs an iron ore industry as much as it needs food and energy.”
Australia should encourage overseas investment in agriculture and tap underground water resources to turn “a water scarce country into a water abundant country,” he said.