Many experts have been predicting a steady decline in mining construction projects in Australia for 2014. In fact, there is still a great deal of fear surrounding the once booming resource industry. Industry experts and analysts continue to share pessimistic reports, indicating that Australia's decade-long mining boom is all but over.
Will the resource industry weaken as predicted, or will it continue to remain strong? At the very least, is there a chance that it will stabilise? Let's take a closer look at relevant data and opinions.
New Project Approvals Restore Optimism In Australia's Resource Industry
Interestingly, with the Federal Government's recent approval of the Arrow LNG project, Australia's resource employer group feels that the resource boom isn't over just yet, despite many reports and notions to the contrary.
In fact, Australian Mines and Metals Association's chief executive Steve Knott has even been quoted as saying that resource industry projects could collectively create more than 5,000 new construction roles just in Queensland. He also anticipates billions of dollars to be injected into the Australian economy as result.
In addition to the aforementioned Arrow LNG project, there has also been a go-ahead on the fourth Curtis Island plant, as well as the Abbot Point coal plant terminal.
The Arrow LNG project - at $17.6 billion - would bring over 4,000 new jobs to Gladstone, in both construction and operational roles.
However, there is potential for even greater growth in this sector. These previously mentioned projects are just a few examples of more than 300 resource industry projects still waiting for approval, representing roughly $500 billion of capital in total. Notwithstanding, these projects may not be approved for some time to come.
In summary, thanks to some of the projects that were approved in early-to-mid December, 2013, some industry analysts feel that any rumors of a waning resource boom are all but false.
The Sharing Of Optimism
Craig James, chief economist at brokerage CommSec also echoes these optimistic sentiments, citing record trade surpluses with China at $45.6 billion. Though he indicates that the mining boom is moving from the construction phase to the production phase, the Chinese purchases of resources is expected to continue.
This is a key point, as other reports also confirm the idea that the high capital investment phase is moving into a production phase with new projects ramping up.
With so many fear-based reports circulating around mining construction and resources, it is difficult to predict exactly how things will play out in the resource industry in Australia in 2014.
Perhaps cautious optimism is the best response in situations like these. Though long-term stability may be too much to hope for, the reality is that there is still work to be done, and there are still funded projects that need to be completed.
At the very least, there will be more work in this sector in the short term. How that will affect long-term prospects in the resource sector remains to be seen.
Image: Stefan Jürgensen