Solar and wind to lead Australia’s decarbonisation effort

Australia’s economic outlook has shifted following escalation of conflict in the Middle East as rising energy costs are expected to push inflation higher than previously forecast, according to Commonwealth Bank economists.The Organisation for Economic Co-operation and Development (OECD) lifted its inflation forecast for Australia in 2026 to 4.1%, citing higher oil prices and renewed disruption to global energy markets.Commonwealth Bank Australia (CBA) expects inflation to rise further in the near term while economic growth slows as households and businesses face higher costs and tighter financial conditions.Commonwealth Bank Australian economics head Belinda Allen says the energy shock has complicated an already delicate economic balance.“Prior to the conflict, the Australian economy was operating above its supply capacity and inflation was proving stubborn,” she said.“The latest energy shock adds a new layer of complexity, lifting inflation further while also weighing on growth.“There is a wide range of possible outcomes from here.“What is clear is that higher energy prices are a headwind for the economy and both households and policymakers will need to navigate a more challenging environment.”Under CBA’s central oil price scenario, headline inflation is now expected to rise to about 5.4% by mid 2026 and trimmed mean inflation, the Reserve Bank of Australia’s preferred underlying measure, is forecast to peak at 3.8% before easing gradually as economic growth slows and labour market conditions soften.The most immediate impact is expected to come through fuel prices as retail petrol and diesel prices have already risen sharply and could increase further in coming months as global oil prices remain elevated.Beyond fuel, higher energy costs are expected to flow through to a wide range of goods and services, including transport and freight, as supply chain disruptions linked to shipping routes through the Middle East are also adding to pricing pressures.While inflation in Australia is expected to remain elevated in the near term, CBA economists expect it to moderate in 2027 as demand slows and unemployment rises.Business investment growth is also expected to be softer, though CBA assesses that the pipeline for business investment is less sensitive to these headwinds than households.However, softer economic conditions and higher oil prices are still expected to impact the profitability of many businesses, which will reduce the cashflow available for investment.Another risk is financial market stress increasing globally, which would make funding conditions in Australia for large projects more challenging and slow the rollout of projects, including within the resources sector.However, this outlook remains highly uncertain and will depend heavily on how the conflict evolves and how long energy prices remain high, CBA economists say.

Diversification will keep major iron ore mining houses profitable, but waning Chinese demand is likely to push smaller producers out of the market, a new S&P Global report finds.

Lynas Rare Earths (ASX: LYC) has reported its best first-half profit in three years as global demand for critical minerals surged and commodity prices remained elevated.Lynas, the world’s largest rare-earth producer outside China, reported a 63% rise in revenue for $413.7m in the for the first half of FY26, following the average price of of all its rare earth products rose to $96/kg during the half.This trend has continued in 2026 with neodymium-praseodymium reaching a domestic price of $157 /kg in China.Lynas Rare Earths chief executive Amanda Lacaze says the market is moving quickly.“Following the completion of the Lynas 2025 capital investment program, we have the assets and capabilities to immediately benefit from the improved market conditions,” she said.“Lynas is the only company able to capture the full value of this market upside.“This is due to our position as the only commercial producer of separated light and heavy rare earth oxides outside China today.”The company also saw a 32% increase in cost of sales due to a 14% increase in neodymium-praseodymium sales volume and a full 6 months of operating costs from Lynas Kalgoorlie. Significant power outages in Kalgoorlie and maintenance activities in Kuantan during the December quarter further contributed to these costs.“All of this occurred in a global context where the focus on rare earth supply chain security is reshaping the market through government actions to address dysfunction and supply challenges,” Ms Lacaze said.At Mt weld, completion of commissioning the expansion project saw the flotation circuit ramped up to 70% of the nameplate and the new hybrid renewable power station achieved 92% renewable energy production in December.“This has been a very exciting period for Lynas,” Ms Lacaze said.“We completed commissioning for the Mt Weld expansion project, delivered the first half year of heavy rare earth production at Lynas Malaysia, launched the Towards 20230 growth strategy and successfully completed an equity raising to support our growth agenda.

Fortescue makes moves in Gabon, delivers record iron ore output Despite an increase in operating costs, Fortescue (ASX: FMG) has delivered record iron ore shipments and landed within production guidance for Q2 FY26.The company shipped 50.5mt throughout the quarter, bringing total shipments for the H1 FY26 to 100.2mt — a 3% year-on-year (YoY) increase.Unit costs rose 5% on Q1 prices to $28 /wmt, predominantly due to higher diesel prices and a weaker exchange rate, but the company’s full year guidance remains unchanged.The company’s Pilbara hematite iron ore was reaching about $140 /dmt while higher-grade product from the Iron Bridge operations was hitting about $180 /dmt for the quarter.Fortescue metals and operations chief executive Dino Otranto says the company has had a record first half for FY26.“This was achieved safely and sets us up well heading into the second half to meet our FY26 shipments and cost guidance,” he said.Fortescue also advanced operations at its Belinga iron ore project in Gabon, Africa following successful senior level visits. A Presidential Taskforce has now been established to streamline the planning and delivery of the Belinga iron ore project.The project was acquired in 2021 but has been slow to start for several reasons, including the deposit’s isolated location and lack of supporting infrastructure.Fortescue is set to deliver a feasibility study in December 2026 and start shipping ore by 2030.Fortescue continued to diversify and bolster its critical minerals strategy during the quarter with the acquisition of the remaining 64% of Peruvian copper miner Alta Copper for $152m.Fortescue growth and energy chief executive Gus Pichot says the company continues to make disciplined progress across its global growth portfolio of metals, critical minerals, energy and technology opportunities.“In line with our critical minerals strategy, this quarter we entered into a binding agreement to acquire the remaining 64% of Alta Copper’s shares,” he said.“Fortescue will apply its strong track record of project delivery and well-established technical, permitting and community engagement expertise to diversify and expand our copper portfolio and exploration footprint in Latin America.”During the quarter, Fortescue also reached an important milestone with delivery of its first large-scale battery energy storage system at North Star Junction.“With a total capacity of 250MWh, this installation marks the first step in a planned 4-5GWh rollout of energy storage required to support the decarbonisation of our operations over the coming years,” Mr Otranto said.