The report Mining and Heavy Industry Construction in Australia, 2003 to 2018warns, however, that the boom will be followed by a severe downturn in new minerals investment in the latter part of this decade.
“Australia is currently experiencing a rolling minerals boom, which is moving progressively through the commodity sectors. The boom, which began in the late 1990s, was interrupted in 2000 and 2001, but is now firmly back on track,” said principal author and senior economist Richard Robinson
“The driving force for this long development boom is a quantum change in the growth pace of world demand for minerals, led in particular by China’s emergence as a consumer of raw materials.”
The report said the rolling boom will fall into three stages, the first starting in the late 1990s minerals investment surge. The second stage got underway in 2002, party driven by a strong increase in coal mine construction.
The report predicted the third and final leg of the minerals boom will drive construction levels past all previous peaks by 2006/07. Strong growth in world economic and minerals demand (particularly in China) will lead to a dissipation of the present oversupply in base metals and thermal coal, pushing commodity prices higher. This will drive a renewal of investment in those areas.
Further, strong world demand will encourage additional investment in those commodities already in tight supply (iron ore, nickel, coking coal, alumina), as well as more oil and gas and downstream processing projects.
The final stage of the resources investment boom will see investment spread across a broader range of projects, including another major phase of coal mine development.
Following this record peak however, BIS Shrapnel expects a severe downturn to hit Australia’s mining and heavy industry construction, starting with a 20% drop in 2007/08. While the completion of some major projects will precipitate the initial decline, the expected peak levels would never be sustainable in a long-term sense.
Outlook New South Wales
Several major coal projects and some gold/copper projects have driven a strong recovery in mining and heavy industry construction in New South Wales over the last three years. BIS Shrapnel predicted a modest decline in 2003/04 due largely to the completion of some major coal and other mines.
Sustained increases in activity are then forecast from 2004/05 to a new record peak in 2006/07, driven by another phase of coal mine development, more gold and base metals mines and metals processing investment.
The report said a number of large coal mines in the $300 to $450 million range are expected, despite the recent increase in state government coal royalties.
Outlook Queensland
Total mining and heavy industry construction in Queensland reached a new record level of $1.6 billion in 2002/03. BIS Shrapnel said the strong rise was partly a result of robust coal activity.
“We expect a dramatic fall over the two years from the peak in 2002/03 to 2004/05, before a sharp rebound in coal, oil and gas and other base metals investment leads to strong growth over 2005/06 and 2006/07,” the report said.
“Several large coal mines in the $200 to $400 million range are expected to commence around mid-decade, along with the $300 million Yabula nickel refinery expansion, other large downstream processing projects and major coal-bed methane projects as Queensland seeks to augment declining gas supplies.”
