The mining boom is over – NOT!

More intel comes out in the media following Deloitte’s irresponsible “media release” that the Mining Boom will be over in 2 years.

Engineering company Monadelphous has dismissed notions that the mining boom is over. It has posted a record profit and says it has enough resources projects to stay busy for many years. The Perth-based firm lifted profit 45% to $137 million, its 11th consecutive year of earnings growth. It clients include Chevron, Woodside, Rio Tinto, BHP Billiton and Xstrata. The Resources Revolution continues …

Why Australia’s resources boom – and property investment opportunities in resources areas – are nowhere near over: Terry Ryder

Another great article by Terry addressing Deloitte’s recent media release about the mining boom ending in Australia in 2 years.

 

By Terry Ryder
Wednesday, 08 August 2012

Three things are fundamentally wrong with the idea that the resources boom will end soon.

One is the notion that the party stops when the construction of a mine or processing facility is completed – when, in reality, that’s when it begins.

Another is the false premise that few new projects will be constructed beyond 2014, a claim that suggests people haven’t done their homework before indulging their addiction to media profile.

And a third is a misunderstanding of the processes under way in China, India and other nations undergoing industrialisation and urbanisation.

That misunderstanding has lead many to describe what’s happening in the resources sector as a “boom”. That’s a misnomer because a boom is a short sharp rise followed by rapid decline.

The demand for Australian resources results from significant structural change in the world economy, inspired in part by the emergence of new economic power nations which are seeking to lift the living standards of very large populations.

This is not a process to be measured in years. It will extend over decades. Property analyst Simon Pressley, recently named Australia’s Buyers’ Agent of the Year, calls it the “resources revolution”.

High ongoing demand for our resources will continue beyond my lifetime, notwithstanding the likelihood of a few jitters along the way. Australia is going to play a primary role in servicing global demand for ore, coal and gas.

The belief that the “boom” ends when construction of new mines and processing plants is completed is just bizarre. As Pressley pointed out in one of his Propertyology reports recently, this in fact is when it begins.

Australia currently has massive new projects under construction, with iron ore projects, coal mines and gas processing hubs, along with associated infrastructure like export facilities and rail links. But the nation doesn’t earn any export dollars until these projects are completed.

It’s only when they start shipping ore and coal and liquefied natural gas (LNG) that the dollars start to flow. And all the mega projects have proceeded with all or most of their future production under forward sales contracts.

The third fault line running through the “the boom is ending” argument is the erroneous notion that nothing will happen in Australia once the current crop of projects is completed. The proponents of this idea need to catch up on their reading – or get out of their offices and visit a few coalfaces.

Most of the big resources projects around Australia are yet to start construction or are just starting to crank up building work. There is so much more to come.

There have been dozens of major announcements over the past month or so, coinciding with those silly predictions that it’s all grinding to a halt. Here are just some of those relating to Queensland alone:

Queensland coal production is expected to more than double in the next eight years. In the same period Australia is expected to become the world’s largest gas exporter. A report from the Bureau of Resources and Energy Economics says Australia’s LNG exports could grow to 106 million tonnes by 2020. The report’s long-term projections also suggest big increases in exports of thermal coal and metallurgical coal.

The $23 billion Australia Pacific LNG project based in Gladstone is to be expanded. Origin Energy, ConocoPhillips and Sinopec have decided to add a second stage, having secured a 20-year supply contract with Japanese power company Kansai.

A coal seam gas (CSG) project in central Queensland is a step closer towards production, with the state government issuing terms of reference for an environmental impact statement. Arrow Energy’s Bowen Gas Project is one of two CSG developments that will form part of the company’s LNG project. Arrow will develop up to 7,000 gas wells over the next 40 years, each with a lifespan of 15 to 20 years. CSG will be transported from the Surat and Bowen basins to be liquefied at an LNG plant at Gladstone.

The $1.1 billion Fisherman’s Landing LNG project in central Queensland is going ahead, after Melbourne-based Molopo sold its Queensland CSG assets to PetroChina. The Chinese group will now begin talks with LNG Limited, which is behind an LNG plant at Gladstone, over a tolling agreement for gas from the Molopo acreage to be processed to be in the plant. Fisherman’s Landing is the smallest of the five LNG plants under construction or planned for development around Gladstone.

Yarwun 2, the $2.4 billion expansion of Rio Tinto Alcan’s Yarwun Alumina refinery, passed a major landmark recently when the first bauxite was fed into the new facility and Yarwun 2 began producing alumina. Eventually the plant will produce 3.4 million tonnes each year, compared with the current capacity of 1.4 million.

Xstrata has agreed to a $110 million pre-commitment for an expansion of the $2.5 billion Wiggins Island Coal Export Terminal at Gladstone, boosting the chances that the expanded port and the associated $1 billion Surat Basin rail project will begin exporting by 2016.

Stanmore Coal will bring 750 jobs to the Toowoomba and Surat Basin regions when it develops a Wandoan mine worth $380 million. Construction will begin in early 2014. The environmental impact statement for the mine says it could be operating and exporting before the end of 2015.

Mt Isa City Council has started the process to freeing up land for developers to build a new suburb of about 400 homes. The council feels the expansion of the resources sector in the area makes existing housing supply insufficient to meet coming demand.

We’ve also had major announcement of developments in Western Australia, South Australia, Victoria, New South Wales and the Northern Territory. Space doesn’t allow me to list them all.

Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.

Why listening to the so-called economic “experts” is a futile exercise

Here’s a great response to the recent news from Deloittes about the end of the mining boom in two years.

By Terry Ryder
Tuesday, 31 July 2012

Things have moved on since a Shakespearean character in King Henry VI advocated “the first thing we do, let’s kill all the lawyers”.

These days the prime imperative is to get rid of all the economists.

I can’t think of another profession so guilty of earning money on false pretences.

Newspapers fill up large chunks of daily space with the predictions of people whose track records are quite appalling.

The outlandishly inaccurate forecasts of the nation’s most talentless profession are made worse by the suspicion that many commentators don’t really believe what they’re saying. Their objective is to generate media sound bytes. Something sensationally negative usually does the trick. Truth is optional.

I still have the forecasts of economists about interest rates last year ringing in my ears. If they’d been right, Australia would have had multiple rate rises in 2011. The year ended without a single rise, but instead, two rate cuts.

Never in the history of human conduct has so much been wrongly predicted by so many, for the benefit of so few.

The weekly pattern of economic reportage is this: economists publish their tips about the upcoming release of data by the ABS; the bureau announces the latest figures on unemployment or economic growth or building approvals; and then economists fill up news pages with their exclamations of surprise, if not disbelief, at how different the official figures were from their predictions.

Economics is indeed the art of explaining tomorrow why the predictions they made yesterday didn’t come true today.

The short explanation is: they haven’t the faintest idea what’s going on.

The greatest mystery in Australian media is why journalists continue to give credibility to talking heads who constantly blunder.

The bottom line is that newspapers don’t give a damn, as long as there’s a pithy quote and a cheap headline in it.

So the chattering economist who got it horribly wrong last week can line up in front of cameras again this week to deliver another burst of misinformation. Accuracy is not only optional, it’s downright inconvenient.

One of the greatest offenders is Deloitte Access Economics, whose talking heads apparently believe there’s no such thing as bad publicity.

A major metropolitan newspaper this week described the firm as “Australia’s leading private-sector budget forecaster”. Despite my cynicism about economists, I had no idea the state of economic analysis in Australia was this bad.

If DAE is the best, we’re doomed.

The firm’s head media junkie Chris Richardson, the pin-up boy for economists who cherish getting it wrong in a spectacularly noisy fashion, will be remembered for his January 2009 media grab that “the budget is buggered”.

This was part of the firm’s promotional effort for its Quarterly Business Outlook, which predicted Australia would fall into recession in 2009. The economic boom, it said, would “unwind scarily fast”, corporate profits would halve and hundreds of thousands would lose their jobs.

“Batten down the hatches,” it declared. “This is not just a recession. This is the sharpest deceleration Australia’s economy has ever seen.”

Oh dear. You’d think anyone who had got it so wrong would be a bit gun-shy about microphones and cameras thereafter.

Hell no. This is about corporate profile, not credibility. And this week the firm delivered another prediction about the budget and the national economy.

Naturally, its bold declaration that the budget surplus has evaporated and the mining boom had only two more years to run was regurgitated without hesitation by an adoring media.

“The strong bit of Australia’s two-speed economy won’t stay strong for more than another two years or so,'” DAE confidently misinformed us.

If you want proof that the exercise is more about headlines than economics, the reference to a “two-speed economy” is all you need. No serious expert attempting genuine analysis would resort to this cheap creation of a shallow media.

As for the so-called boom in the resources sector running out in two years, I’m willing to predict it will this be with us when my grandchildren are my age.

Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.

The end of the mining boom? Access Economics’ warning may be premature

The end is in sight for Australia’s mining and investment boom, according to Deloitte Access Economics‘ June 2012 quarter Business Outlook, but HSBC says there is a lot more still to come.

“A striking investment boom continues to do all the heavy lifting on our growth,” said Access director Chris Richardson.

“Yet the peak of the project pipeline is already in sight, meaning the key prop to the faster part of Australia’s two-speed economy is looking less certain the further out you look – though there’s still enough gas in the tank of huge resource projects to provide handy pipeline protection if Europe and China were to turn pear-shaped.”

Richardson warned in the meantime there was still “plenty of pain to go around”.

“Manufacturing growth only just has its head above water, and the utilities sector is also shrinking, in part due to the absence of any certainty on the future of carbon pricing,” he said.

Richardson said two-speed troubles were keeping inflation low, aided by related moderation in wage gains and the Australian dollars stellar strength.

“Even productivity is showing some signs of life and oil prices have dropped back, while carbon pricing is likely to be just a one-off boost to prices,” he said.

“But the productivity improvement needs to continue – and even if it does, a steadier Aussie dollar threatens less benign import prices, while wages may resume their rise as jobs recover and boomers retire.”

Given that much of Australia’s import spend is locked in for a couple of years due to huge resource construction projects and that non-resource exports such as manufacturing, tourism and education remain weak, Richardson warned the current account deficit may worsen from here.

He said that provided the outlook for Europe and China holds, there may only be one interest rate cut left in the cycle.

But despite the report’s predictions of an end to the boom, Richardson said the overall outlook for Australian growth is still looking better than most people realise.

He pointed to “surprisingly strong” consumer spending and said some sectors were holding up better than expected.

“This includes finance, which official statistics suggest is still growing rapidly and employing more people, despite announcements to the contrary, as well as recreational services, and transport,” he said.

“Even the public sector is growing well, with the huffing and puffing of the pollies yet to show up as a slowdown.

“At the same time, some sectors are still making a silk purse out of a sow’s ear, with the stupendous strength in engineering work keeping the wider construction sector afloat, and others still are just downright booming, with mining production and farm output growing at double digit rates.”

However, Access has been reliably forecasting the end of the mining boom since at least 2006, when Richardson told The New York Times “the only supercycles to date have otherwise been known as world wars”.

Paul Bloxham, chief economist at HSBC, told SmartCompany that while commodity prices look like they peaked last year, Australia can still look forward to growth from investment coming on line.

“The mining boom is going to have a number of stages: the first stage has been a big ramp up in income growth from rising commodity prices; the next stage is a ramp up in investment, which we are part way through; and the last stage is a pick-up in export volumes, which has only happened gradually and there is a lot more yet to come,” says Bloxham.

“Investment looks like its largest contribution to the economy will probably happen this year, but the export story will start to lift in terms of contributing to growth.

“It’s hard to call an end to the mining boom. It’s a long drawn-out process with a number of different phases to it.”

http://www.smartcompany.com.au/economy/050837-the-end-of-the-mining-boom-access-economics-warning-may-be-premature.html

Two years left for mining boom: Deloitte

The mining boom will only last another two years and time is running out to get new mega-projects into production, according to Deloitte Access Economics.

In a report this morning Deloitte said the amount of mining projects slated for development had slowed down.

“The strong bit of Australia’s two-speed economy won’t stay strong for more than another two years or so,” it said.

The economic forecaster also said the current projects in development were the result of previous plans and beyond these developments there was little on the horizon.

“Mining companies are making it clear the current spike in investment is due to decisions taken a while back, whereas we are getting few new mining mega-projects across the line,” it said.

Deloitte said the slowing industry also meant the Government would have trouble bringing the budget back to surplus.

But trade minister Craig Emerson told ABC Television today the Government was still confident of achieving a surplus.

Last week resources minister Martin Ferguson said the era of high commodity prices was already behind us and to stay strong Australia needed to be more productive and develop new technology.

http://www.miningaustralia.com.au/news/two-years-left-for-mining-boom-deloitte