THE mining sector has reached a new five-year low with confidence levels likely to take years to recover, according to industry leaders surveyed in the latest Mining Business Outlook Report prepared by Newport Consulting. Despite some optimism last year, the 2014 report found mining leaders plagued by tough market conditions including declining commodity prices, falling demand and a difficult regulatory environment.
A majority of leaders 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.
The report confirms the sector's increasing sombre outlook, with 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 least 3-5 years.
Leading economist Saul Eslake supports the report's findings. "I don't expect any major new mining projects to commence in the next few years. 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."
Tough market conditions are the prevailing factor driving the gloomy outlook for almost five in seven mining leaders. A further 25% are concerned by falling demand in key markets such as China, stating that demand from other markets will remain hampered due to the high costs of doing business in Australia.
While last year's outlook was dominated by postponements in new investment, this year's negative views are shaped by persistent, ongoing macro-economic and market challenges out of the sector's control.
Newport Consulting managing director David Hand says, "Mining leaders are telling us they've done all they can to address their business performance, as demonstrated by large cost-cutting exercises and job retrenchments. Leaders are demanding better business conditions for confidence to return. They've accepted the new lows and have embraced a government who will listen. However, they want action quickly - less red tape, more flexible IR 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 with 60 mining executives from a broad range of private and public companies.