MINING INVESTMENT TO SLUMP BY 40 PER CENT

AUSTRALIAN mining investment is expected to collapse by 40 per cent over the next four years, according to a report recently released by BIS Shrapnel.

Despite the decline, the Mining in Australia 2014 to 2029 report indicates that the industry will continue to grow in terms of its share of the national economy with mining production estimated to surge by one third over the same period.

These predictions come on the back of the mining investment boom which peaked in 2013/14 at $93.1 billion.

“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,” says Adrian Hart, Senior Manager of BIS Shrapnel’s Infrastructure and Mining Unit.

“Indeed, without oil and gas, mining investment would have fallen 25 per cent 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.”

Hart emphasises that it is not all bad news with a boom in mining production, operations and maintenance expected to roll on right through the next five years.

He says mining production increased by 30 per cent over the past three years and now makes up 10 per cent of the national economy on this measure.

“Essentially, the investment boom continues to shift to an echo production, operations and maintenance boom,” says Hart.

“In Western Australia, the value of mining production will overtake that of the entire Australian manufacturing sector during 2014/15. This is the new face of the mining boom in Australia.”

Report author and BIS Shrapnel economist, Rubhen Jeya says recent losses in employment and the closure of mining operations are the consequences of a market reeling from lower prices, the high Australian dollar, and weaker growth in export demand.

He says miners and industry contractors need to adapt to the expected challenges.

“Overall, contractors and suppliers to the mining industry should note that the end of the current boom in mining investment still presents opportunities in other parts of the mining boom, which are still unfolding: operations, production and maintenance,” says Jeya.

“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 a highly cyclical industry.”

The report found the value of mining production increased by 9.4 per cent during 2013-14 to $164 billion.