australian mining investment set to plunge 40 per cent 902372014

Iron ore, coal and LNG will lead the massive cutback in mining investment in Australia

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By :  ,  Financial Analyst

BIS Shrapnel, an independent provider of industry research and forecasting services, says in its report “Mining in Australia 2014-2029” that investment in the sector could decline by 40 per cent in the next four years, the biggest slump on record.  

"Already we're seeing a substantial slump take place in iron ore and coal investment around the country but now with the LNG investment boom about to end we're about to see the biggest slump ever in mining investment," spokesman Adrian Hart said, according to ABC News.

The forecaster expects mining investment to fall sharply going into 2017 and said, as of now, the plunge had “barely begun.” Indeed, last week BHP Billiton Limited (ASX:BHP) chief Andrew Mackenzie declared that the era of big expansions in iron ore production had ended for the company, and that its board had not approved new iron ore projects since 2011, as reported by The Australian Financial Review.

The Australian said today that iron ore prices had dropped below the key US$70 per tonne level to US$69.80, showing a fall of about 12.5 per cent over the past month, and approximately 47 per cent this year. “Commodity prices across the board have been suffering in a low-price environment and the heads of US giant Peabody Energy, Centennial Coal and Northparkes Mines have all warned that market conditions are the worst they have seen in 25 years,” the newspaper said.

The mining investment boom topped out in 2013-14 at US$93.1 billion, according to Mr Hart.

The doom and gloom in Australian mining lifted somewhat on Friday, when China demonstrated its commitment to economic growth by cutting its one-year lending rate by 0.40 of a percentage point to 5.6 per cent and its one-year rate for deposits by 0.25 of a percentage point to 2.75 per cent 

This announcement lifted shares across the globe, and pushed US stock indices to record closing highs.

At 0700 AEDT today, the Australian dollar was trading at 86.70 US cents, up from 86.31 cents on Friday. The ASX is expected to open higher today, given that the December share price index futures contract was up 52 points at 5,360 at 0645 AEST, according to the Trading Room.

Find up to date information on the ASX at City Index.

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