In its fifth year now, Newport’s annual Mining Business Outlook Report serves as an independent pulse-check of Australia’s mining industry.
This year’s Mining Business Outlook Report paints an even more sombre outlook for the mining industry than our previous four reports.
For this special five-year edition, we spoke directly with Saul Eslake, one of Australia’s most respected economists and Philip Dimitriu, Regional Engineering Director, Australia-New Zealand, Check Point Software Technologies.
In 2014- 2015 the mining industry is concerned by uncontrollable market conditions such as low commodity prices, changes in demand, escalating costs, a tough regulatory environment and a changing competitive landscape. Mining leaders need to re-focus primarily on what they can control, including more effective cost management, operational efficiencies, improved productivity, profitability and cash flow.
From our interviews with more than 60 mining leaders, here are the top five take-away messages-
Future outlook reaches a new five-year low.
An overwhelming 93 percent of mining leaders in this year’s report were not optimistic about their growth prospects for the next 12 months – up by more than 50 percent compared to last year. Most hold low hopes of the sector resuming large-scale projects in the next 12 month, and only 7 percent believe they will see some large-scale projects return during this time
Low commodity prices and falling demand are the largest concerns for mining leaders.
Tough and volatile market conditions continue to drive the gloomy outlook of mining leaders, with 68 percent citing this as their main concern. A further one-quarter of respondents were concerned most by falling demand in key markets such as China. Meanwhile, demand from other markets remains hampered due to the Australian dollar’s high price in comparison to the currencies of other resource producers such as Brazil and South Africa.
Investment inhibited due to high business costs and a tough regulatory environment.
Our mining leaders spoke at length of the high costs of doing business, especially wages and energy, plus the negative effects following six years of an anti-mining government. They criticised the arduous process of getting developments approved, and government regulations that make new mining projects difficult to start.
New federal government embraced, but industry wants more action.
A sizeable 70 percent of mining leaders had anticipated major changes to the sector in the new government’s first year, but say that they have not seen adequate action yet or election promises delivered on. The sector is calling for more assistance with industrial relations laws, and a fast-tracking of the promised infrastructure investments that hold the key to economic growth.
Knee-jerk cost-cutting reactions are hampering productivity.
A trend was observed this year of mining companies equating better operations with cost-cutting, evident in the number of retrenchments made over the last 18 months. The mining sector shed 26,000 jobs between May 2012 and the end of June 2013, and is likely to lose more in the coming year. Investment is also down. Both factors are likely to place enormous economic stress on the regional towns where mines close.
Click here to view a copy of the 2014 Mining Business Outlook Report