Home > Five-year mining boom now underway, says new BIS Shrapnel report

Five-year mining boom now underway, says new BIS Shrapnel report

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The new BIS Shrapnel report on the Australian mining industry forecasts record increases in investment and production over the next five years.

According to a new report released by leading independent economic forecaster and industry analyst, BIS Shrapnel, Australia’s mining sector will boom right through the next five years despite concerns over the global economy and introduction of new domestic taxes on carbon, iron ore and coal mining profits. However, supply side constraints will weaken economic benefit to Australia.

BIS Shrapnel’s Mining in Australia 2011 to 2026 report forecasts that annual mining investment in Australia will surpass A$80 billion by 2015 (in constant 2008/09 prices) boosted by the development of multi-billion dollar projects across the oil and gas, iron ore, coal and copper sectors.

Following the floods-driven setback in 2010/11, Australian mining production is expected to pick up strongly across most commodities in 2011/12 and accelerate in subsequent years as global demand improves and several years of investment in new capacity begins to bear fruit.

The strong performance of the mining sector will help accelerate the Australian economy, with growth in Australian Gross Domestic Product (GDP) forecast to rise to 3.1% in the year to June 2012 and 3.8% in the year to June 2013.

According to Adrian Hart, Senior Manager for BIS Shrapnel’s Infrastructure and Mining Unit, the long term outlook for key commodities is still very strong though the global economy remains very patchy.

He adds that demand for metals and minerals continues to be driven by the long-term industrial development of China and India, which is also delivering growth in other Asian economies.

Additionally, a number of very large mining and energy projects in Australia have recently commenced or been approved across LNG, coal, iron ore, copper and gold.

Key highlights of BIS Shrapnel’s Mining in Australia 2011 to 2026 report:

  • Mining fixed capital investment covering construction and plant and equipment will rise 75% to nearly A$60 billion by 2015/16 
  • Mining investment as a share of total private investment will rise from 7% to 20% over the decade to 2015 
  • Mining production value will rise nearly 50% over the five years to 2014/15, following a decline of 2.8% in 2010/11 due to the Queensland floods 
  • Growth in Australian GDP forecast to rise to 3.1% in the year to June 2012 and 3.8% in the year to June 2013 from mining sector performance 
  • Total private investment is forecast to grow 7.6% in 2011/12 and 11.7% in 2012/13, with mining investment the key growth driver   
  • New mining investment surged 11% in 2010/11 and will increase a further 66% to A$83bn by 2015/16 
  • Significant increase in new oil and gas investment, specifically the new LNG projects in Queensland, Western Australia and the Northern Territory 
  • Coal and iron ore investment will grow 60% and 40% respectively over the next 5 years 
  • New investment boom will increase work opportunities for contractors and suppliers to the mining industry 
  • Mining production is forecast to rise 5.2% in 2011/12 and 8.9% in 2012/13 
  • Black coal production will rise 30% during these two years, and surpass 600 million tonnes per annum by mid-decade 
  • Oil and gas, and iron ore production from multi-billion dollar greenfield and expansion projects will sustain record rates of growth from 2012/13 
  • Mining production is forecast to rise 45% in real terms 
  • Mining maintenance activity will also rise substantially from A$6.5 billion to A$8 billion per annum  
Supply side risks to the outlook

Skills and equipment shortages, capacity constraints in key rail and port transport chains, a lack of supporting infrastructure in regional mining locations and rapid increases in construction costs will be some of the shortcomings of the Australian mining industry’s growth story.

According to BIS Shrapnel’s Mining in Australia report, rising production and the return of strong investment growth will also bring back the same problems, which previously constrained the boom in mining.  

Hart believes these supply side risks are likely to constrain the upswing in investment through the next five years as mining companies scramble for skills and experience large cost blowouts on major projects.

Work for Australia?

According to Hart, Australia will miss out on many of the benefits from the mining boom as miners offshore a larger proportion of fabrication and steelwork requirements, particularly the construction of modular structures. Temporary overseas-based workforces may also be brought in during the construction phase.

Hart also says that only a substantial skills immigration program can allow the high levels of investment to be delivered in such a short time frame.  

BIS Shrapnel is Australia's leading provider of industry research, analysis and forecasting services. 

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