Tailwind for local mining
MORE jobs and flights a further sign that worst is behind CQ mining.
Wednesday 22 March 2017
A National Australia Bank economist says the local mining industry is “staging a rebound” that is more than just a short-term rise off the back of late last year's boom in coal prices.
The NAB’s David de Garis has had discussions with mining supply businesses and looked at both employment ads and airport flows into Central Queensland to try and see whether there were tangible signs of improvement in the region.
He concluded that after nearly five years of declining business confidence in the mining sector, there are tangible signs that the worst is behind us.
“While cost control remains a corporate strategic hallmark, there is evidence that there is a measure of "catch up" in spending by resource companies in operational expenditure,” he said.
“Now that commodity prices are higher, that has provided a relief valve for companies to spend on essentials that were suspended when times were especially tough.
“In the Queensland coal industry SEEK Job Ads in the Mackay and Coalfields region have shown some signs of increasing in recent months, while passenger traffic on the key QLD mining routes has stabilised and tentatively picked up at some airports [Mackay, Gladstone and Rockhampton].
“More recently, resource industry customers have become more active again according to mining service companies, evident in a noticeable pick up in enquiry rate for prospective new orders.
“A major equipment supplier noted that resource companies were again buying new equipment, also noting these were replacements for depreciated/worn-out stock as well as increase spending on repairs and maintenance.”
While Mr de Garis says the “tailwind” behind the resources sector is to do with both the resetting of costs in the industry and the Chinese driven recovery in coal prices, he warns miners will remain on a tentative footing for most of this year.
“The outlook for commodity prices remains uncertain,” he said.
“Much will depend on the degree of vigour pursued by the Chinese authorities in seeking to further reform its coal and steel industry as well as growth in China and elsewhere.
“We do not see signs of a change in appetite among major resource companies to open the chequebook and spend up in a major way on capacity-expansion projects.
“And there is some spare still available after a once in a generation lift in capacity.
“Even so, there are emerging measurable signs that the tailwind is more than apparent in just the highest level of indicators and is beginning to become more apparent at the “coalface”.
The Bank’s assessment is in line with local observations from those within the mining support sector.
Last week Chairman of the Resource Industry Network’s (RIN) Health and Safety Committee Mick Crowe said things were getting better.
“Yes there are some small things happening, certainly there are more discussions about productivity and growth,” he said.