The resources sector in Australia commences 2016 in a sober mood.
Prices have dropped significantly in the past 12 months (see table), with no signs at this stage of a turnaround. Project work has declined markedly as a result.
But softening the blow, production of most minerals and oil-and-gas is expected to increase in 2016, if only marginally.
Specific production forecasts were released this month by the Australian government’s Chief Economist (see table).
They mean that work at operating mine and oil-and-gas sites – such as maintenance and shutdown work and replacement of equipment – is likely to be reasonably strong in 2016.
Increased production in 2016 will result in part from lower prices (thus boosting demand) and the relatively weak Australian dollar. In addition, some special issues are involved.
For example, copper production at Olympic Dam in South Australia will return to normal this year following the closure of a grinding mill in 2015.
Production of thermal coal (used in electricity production) will be assisted by strong demand from India and increased domestic demand in Indonesia, which will adversely affect exports.
Bauxite exports are benefiting from Indonesia’s ban in 2014 of the export of unprocessed minerals.
Gas production will jump as a result of the production of liquefied natural gas (LNG) from three new plants at Gladstone in Queensland.
Zinc is the only mineral for which a major decline in production is expected, a result mainly of significant cutbacks by mining company, Glencore.
During 2016, construction work associated with mining and oil-and-gas is likely to account for around 30% of total engineering-construction work. (This is based on figures on recent trends from the Australian Bureau of Statistics.)
Although down from over 50% in the boom years, this is still significant.
But the nature of the work has changed, with operating sites taking over in importance from new developments.
