Market Structure of the Mining Industry - Essay Example

A number of characteristics define the mining industry. First, the industry fits into three sectors: the coal industry, industrial minerals, and metal mining (McLemore, 2008). Secondly, the industry bears a global trait as the largest companies come from distinct countries, including the developing nations (Shapiro, Rusell & Pitt, 2007). More to these, a lot of capital gets invested in this industry, which makes it capital intensive. Fatal injuries also characterize the mining industry according to Gunningham (2007).

The ore bodies in this industry also have a relatively short product life expectancy. More to these, the industry hires technicians to conduct the various processes, as well as engineers and geologists for short periods. In addition, areas affected by mining activities lack development, due to the negative environmental impacts of mining activities (Marinos, 2001). The iron-mining sector Gross defines an iron ore “as any merchantable or beneficiated mineral aggregate, that occurs in sufficient quantity to be a sustained supply of raw material to industry, and from which iron can be satisfactorily recovered under existing economic conditions or which may be usable in anticipated economic circumstances” (Geology Report No. 22). This means that iron ore mining serves as an important economic activity as it leads to the derivation of profits.

In Minnesota, for example, this industry greatly affects the region. It contributes billions of dollars to the state’s economy. More to this, it accounted for 11,200 jobs in 2010 in the area, and pays huge taxes to the state, thus boosting the economic capacity of the region. Additionally, the industry supports local schools in Minnesota, thus highlighting the significance of this industry, wherever the activity takes place (“Minnesota iron Organization”, 2014). Various characteristics can be associated with this type of mining.

First, iron deposits can be classified into three types. The first one relates to iron deposits that are suitable for iron ore in their natural condition. The second type refers to iron deposits that require concentration, as well as processing for them to become usable. The last category consists of iron deposits that possess little economic value. More to these, the iron industry undergoes frequent changes from time to time. These changes include changes in market conditions, or specifications, as well as technology.

Such changes influence the economic viability of iron deposits as deposits currently associated with little economic value may be of great economic value tomorrow. In the same way, profitable iron operations today may become unprofitable in the future. Nature of the mining market The mining industry assumes an oligopolistic market structure (Campbell, 2004). According to Boyes and Melvin (2012), this means that only a few firms get to dominate the production process. In developing countries, for example, large multinationals possess superior inputs, and technologies, thus achieving considerable control in such markets (Hilson, 2006).

More to these, the firms deal with standardized or differentiated products. New entrants in the mining industry find it very difficult to succeed as the process involves high capital costs (Mukherjee, 2002). Other factors that make entry into the industrial complex include the ability of certain firms to possess strategic resources (Daniels & VanHoose, 2011). In addition to these, the mining firms operate interdependently. This emanates from the fact that the action of one firm influences greatly on the other firms (Boyes & Melvin, 2012).

Operation of the marketSome governments give the private sector the mandate to operate, and manage mining operations, thus making the government assume the role of the industry’s regulator (“Ibpus.com”, 2007). Government involvement guards against illegal and anti-competitive behaviors by the large oligopolists, thus providing a suitable business environment. The Federal Trade Commission in the United States also works at hindering the collusion of the firms, hence protecting the public interest (O’Connor, 2004).

In Karnataka, for example, iron ore miners require statutory approval to produce. The ore miners also face restrictions on the amount that they can produce as imposed by the Supreme Court, which dictates a certain ceiling for these companies (Kulkarni, 2014). More to these, international agencies play a key role in the mining industry as they seek to address, such issues as environmental concerns, health, and safety standards (“IBP”, 2007). The demand and supply in the mining industry also tend to be regulated by certain authorities.

Governments, for example, impose limits that either reduce or increase mineral demand and supply (Sciubba, Manfrida & Desideri, 2010).