The worst is over: Commodities to recover in 2016

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 19 Jun 2015   Posted by admin


Commodities are expected to contribute about $230.1 billion in revenue to the Australian economy in 2016, with iron ore and oil and gas exports to be the nation’s biggest winners.

By Jane Goldsmith

Friday, 19 June 2015

THERE is a light at the end of the tunnel for Australia’s mining industry, with several major mining divisions expected to bounce back in the 2016 financial year, an IBISWorld report has revealed.

Iron ore and oil and gas were expected to lead the industry turn-around following last years’ dramatic commodity price drops, with sector-wide revenue forecast to grow 8.6 per cent from $211.8 billion in FY2015 to $230.1 billion in FY2016.

“IBISWorld expects world iron ore prices to strengthen in Australian dollar terms following consecutive years of large price drops,” the report stated.

“This is expected to assist Australian iron ore miners as production volumes continue to rise.”

Within the oil and gas sector, additional extraction capacities in FY2016 would contribute “significantly to capital expenditure in the mining division in 2015-2016 and also drive strong export growth”, the report said.

Oil and gas revenue was forecast to grow 12.8 per cent year-on-year, drawing about $45.4 billion into the Australian economy, while iron ore would rebound 5.5 per cent to $66.5 billion.

IBISWorld predicted uranium would also restrengthen as major uranium oxide consumers China, India and South Korea continued expanding their nuclear electricity generation facilities.

“The continued depreciation of the Australian dollar is expected to contribute to uranium revenue and export growth,” IBISWorld senior industry analyst Spencer Little said.

“Australia’s total uranium production and export volumes are likely to rise due to new mine developments and several expansion projects.”

However, the report suggested the outlook for coal would remain bleak.

Black and brown coal were forecast to contribute about $39.3 billion and $980.9 million, respectively, to the Australian economy in FY2016; a 4.1 per cent and 1.1 per cent decrease from FY2015’s already-subdued revenues.

“Overall, Australia’s mining division is expected to recover in 2015-2016, after facing several major supply challenges in the previous year,” Mr Little stated.

“Despite declines in black and brown coal mining, growth in the division’s larger industries is expected to boost overall revenue. Rebounding prices for iron ore and crude oil, and additional LNG export capacity are projected to underpin stronger division performance in 2015-2016.”