July 05, 2017 / News
The mining industry is one of the largest contributors to Australia's economy. According to IBIS World's report on Mining in Australia, the mining sector generated $197.4 billion in revenue, contributed approximately 6.9% to Australia's Gross Domestic Product (GDP) and earnt $138.5 billion in export revenue in 2016. It is clear to see that the mining sector is one of the major pillars of the Australian economy, and its performance has a significant impact on the economic health of the nation.
Also, with 7,090 companies part of the mining sector, the mining industry is also a significant employer in Australia, with over 230,000 Australians employees. The huge significance of the mining industry and the Australian economy's heavy dependence on its revenue, means that all eyes are on this sector, especially when it comes to its sustainability and projected profitability in the future.
Recently, the health of the industry has been called into question with commodity prices taking a tumble, mainly due to the global oversupply of commodities, such as iron ore, oil and coal, as well as weaker demand. Australia's mining industry has also been negatively affected by the slowed growth of China's economy. China's economy had been riding the highs of rapid economic growth, however, these numbers have proved to be unsustainable in the long-term with their economy starting to cool off. This has resulted in a decrease in the buying of Australia's mining exports, which is significant as China is Australia's most important export market.
Investment into mining business and projects have also waned, which has led to job cuts, project downsizing, and even the shutting down of mines.
States and territories that are heavily reliant on mining have been hit the hardest by the recent slowing of the mining boom. States and territories such as Western Australia and South Australia have felt the sting of decreased job opportunities and the decreased levels of mining revenue coming into the state. In WA's Pilbara region alone, approximately 3,400 jobs have been shed due to the mining downturn.
However, it has started to look up for Australia's mining industry with commodity prices starting to moderately pick back up, foreign investments starting to flow back into mining projects, and mining companies moving into the production phase.
Another reason that Australia's mining industry may be back on the mend, is that different types of mining are starting to be considered. For example, tech metals mining. This will open up new project opportunities for mining companies and attract greater international investment.
Potentially more fruitful times appear to lie ahead. Some predictions for the future of Australia's mining sector, include:
Increased Commodity Prices, Improved Revenue & Profitability
Despite the relatively recent slump in commodity prices, which was a major contributing factor to the downturn in Australia's mining industry, an increase is expected to occur. The boost in key commodity prices will help to improve earnings on mining exports and enhance profit generation for the sector. The stabilisation of China's economy and their increased demand for Australian raw materials, such as iron ore and metallurgical coal, are one of the key factors contributing to this surge.
Increased Outsourcing of Mining Activities
It is predicted that outsourcing of different mining operations will become more and more commonplace. Outsourcing is increasingly becoming an attractive option for mining companies for two main reasons. Firstly, it can help to reduce costs as it allows mining companies to minimise their overheads and focus their resources on critical functions. Secondly, outsourcing can provide mining companies with access to expertise and qualified personnel, that have the potential to improve commercial outcomes.
Increased Environmental Concern
Environmental issues are gaining more traction in public debate, which has resulted in increased pressure on companies to act in a more environmentally conscious way. Since the nature of mining involves significant alteration to the natural landscape, depletion of natural resources, and large-scale consumption of energy, integration of greener processes throughout the lifespan of a mine will be pushed for. A key point of interest will be mine rehabilitation. Implementation of more environmentally-conscious processes may attract additional costs for mining companies, however, it can help build better public perception.
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