Confidence in Australia’s mining sector has reached a new five-year low, and is likely to take years to recover, according to industry leaders surveyed in the latest Mining Business Outlook Report.
Despite some optimism last year, the 2014 report found mining leaders surrounded by declining commodity prices, falling demand and a difficult regulatory environment.
A majority shared the view that the sector’s future is now out of their control, signalling an increasing possibility of drastic changes to the industry, especially in thermal coal.
An overwhelming 93% of leaders not optimistic about their growth prospects for the next 12 months, up by more than 50% compared to last year. A further 82% are not confident of large-scale projects resuming in the next 12 months, predicting it will take at three to five years.
Saul Eslake, leading economist, supports the findings, saying: “I don’t expect any major new mining projects to commence in the next few years,” he said. “There is wide consensus that commodity prices will continue to decline as more supply comes on stream globally, while the growth rate of demand for commodities slows. Economic growth will continue at a below-trend pace over the next 12 months, and unemployment will continue to rise.”
David Hand, Managing Director of report authors Newport Consulting, says mining leaders are telling us the’’ve done all they can to address their business performance, as demonstrated by large cost-cutting exercises and job retrenchments.
“They’ve accepted the new lows hit by the sector and have embraced a government who will listen,” he says. “However, they want action quickly: less red tape, more flexible IR (industrial relations) laws and better infrastructure.”
The report also reveals that the industry has lost its investment appeal, with 89% of leaders agreeing that Australia is no longer the world’s best investment market.
The report, conducted annually since 2010 by operational management consultancy Newport Consulting, canvasses the views of Australia’s mining leaders. It draws on in-depth interviews held between April and June 2014 with 60 mining executives from a broad range of private and publicly listed companies.
How the mining leaders replied:
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