This is one of the findings out of BIS Shrapnel’s Mining in Australia 2014-2029 report, which predicted continued strong growth for the industry but challenges ahead in the short to medium term for miners.
Among the challenges is the dramatic fall in mining investment, which peaked in 2013/14 at $93.1 billion and is expected to fall as low as $55.1 billion in 2017/18.
However, this will coincide in a sharp increase in production, which the report predicts will grow from $164 billion in 2013/14 to $219 billion in 2018/19 – a 33% increase.
BIS Shrapnel senior manager of infrastructure and mining Adrian Hart said there were tough times ahead for mining investment.
“In terms of the mining investment bust, we have hardly begun – this has a long way to run,” he said.
“While investment has already fallen sharply across coal, iron ore and other commodities, it was the boom in gas which drove the peak in investment in 2013/14.
“Indeed, without oil and gas, mining investment would have fallen 25% in the last financial year.
“However, the completion of a range of large gas projects on the east and west coasts will be the key driver of the long slump in investment from here.”
But while things may look bleak, Hart said new opportunities would present themselves in mining production.
“Essentially, the investment boom continues to shift to an echo production, operations and maintenance boom,” he said.
“Over three years, the real value of mining production has increased by 30%. Now it makes up 10% of the national economy on this measure. Another 33% growth is expected over the next five years, with the share (of the economy) rising to 12%.
“In Western Australia, the value of mining production will overtake that of the entire Australian manufacturing sector in 2014/15.”
In the short-to-medium term, challenges are expected to remain for miners and contractors. The report predicts a high Australian dollar combined with weaker export demand growth and low coal and iron ore prices to continue unfavourable conditions over the next few years.
But report author and economist Rubhen Jeya said the market would correct itself in time.
“Eventually, global efforts to slash investment in response to currently weak prices will itself help to create the price conditions for new investment cycles in the future,” he said.
“The challenge is to make the right strategic choices today to take advantage of the opportunities as they come along, commodity by commodity, region by region, in what will remain to be a highly cyclical industry.”
