The Location of Minerals Processing

Moomy, R.C. (1984). The Location of Minerals Processing. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-84-031

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Abstract

A popular perception has arisen that the mineral production of developing countries is too often exported in unprocessed form, thereby depriving the host country of the value-added and benefiting the developed country importer. The validity of this allegation and possible explanations for the location of minerals processing is the subject of this working paper. An examination of the patterns and trends in the location of processing for aluminum, copper, iron, nickel, tin and zinc, up to the refined metal stage, reveals that developing countries are processing a larger proportion of their mine output today than 30 years ago. Despite significant progress, the developing countries as a group are processing less than 50 percent of their ore production, with the exception of tin and copper. When the major ore producers from all country groups are considered, the data reveal that only two commodities, tin and alumina, exhibit a trend toward greater domestic processing. Thus, the pattern of exporting minerals in unprocessed form is not confined to developing countries, but is exhibited by a number of developed countries, particularly Canada and Australia.

To explain this pattern of behavior the chapter offers three plausible explanations. The first contends that economic factors, such as comparative costs, are responsible for the location of processing. The second explanation attributes the location to primarily political factors, such as tariff barriers or government subsidies. The third explanation, though not entirely independent of the other two, emphasizes the dynamic nature of the location of processing by accounting for the effect of the historical legacy.

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