After a tumultuous period of unease across Australia’s once burgeoning mining industry, calmer waters are being predicted ahead.

While today’s mining industry doesn’t measure up to the glory days of years gone by, Australia still remains one of the world’s leading mineral resources nations.

Atradius ANZ Managing Director Mark Hoppe said there were positive signs ahead, with Australia still a positive power player globally, and ranking in the top two to five countries in the world, depending on the commodity.

“Since its peak in 2014, mining has had its struggles, but is now showing more positive signs,” Mr Hoppe said.

“I think if people were asked in 2015 where they thought it would go, and where it would end up, I think most people would have accepted where we’re at now as being okay.

“However, mining operations need to be aware of, and prepared to face, a number of key challenges in the coming months and years.”

Atradius, a specialist in trade credit insurance, highlighted key challenges facing the mining sector ahead, adding that although they pose a significant hurdle, they could be overcome, with awareness being key.

“Mining operations and those looking to do business with miners should be aware of the coming challenges so they can develop a strategy to overcome them and continue to trade confidently,” Mr Hoppe said.

Atradius highlighted a rebalance of the supply and demand chain as the first key factor ahead for the mining sector.

Today, analysts and the government are predicting iron prices will stabilise in the next five years, which would make income and returns more predictable?and allow businesses to better plan for costs, in turn making lending to, and investing in, mining companies attractive again.

“The prices of some of the major commodities have bounced back,” Mr Hoppe said. “They’ve certainly not bounced back to 2014 prices, but they have come back at a fairly steady level.

“That’s been pushed in some instances by a reduction in supply, which has helped prices go up in other areas.”

Meanwhile, the industry is expected to see less high- profile causalities going forward, with companies implementing better strategies to avoid the financial difficulties which have seen many once-strong companies go into administration in recent years.

“There were a lot of people effected, and we had lots of mines close down in the downturn, but I think we can learn from them and work through the difficult times better next time,” Mr Hoppe said.

China is also weighing in heavily on the future of the Australian mining industry, with its urbanisation still driving steel consumption in construction and infrastructure.
Yet, uncertainties lay ahead with the Chinese government’s strategy, after it committed to reducing its steel-making capacity domestically, while also announcing plans to build a brand new city – Xionhan New Area.

The new city will be twice the size of New York City, measuring almost 2000sqkm, with doubts around where China will source the steel and raw materials.

Looking back, China was an impressive asset for Australia’s mining boom, which drove the sector to record highs, yet Mr Hoppe acknowledged it would be difficult to reach that level again.

“Do we think China is going to double in size in a 10-year period again? Probably not.

“But I do think the Australian mining sector will have good times again, and I think it will always be strong and an important part of the Australian economy,” Mr Hoppe said.

The perceived future of the mining industry is seeing a new focus on expenses, with miners such as Fortescue publicly stating an intent to drive down costs and debt.
With this focus, Atradius is predicting more small miners and exploration companies will stop solo explorations, instead opting to look towards mergers and acquisition prospects to drive down costs.

“The larger miners can often ride out a period of uncertainty, but that doesn’t mean there isn’t a place for the smaller miners, because they can be more nimble,” Mr Hoppe said.

“It’s a case of not over-committing, being aware that issues can arise and not getting complacent.

“For example, how realistic are companies being in their projections, what are their thoughts on the level of the product they can supply and the price they’re getting for it and, most importantly, how well can they manage costs if there is a downturn?”

Mr Hoppe was positive Australia’s dynamic mining industry could overcome the challenges ahead, but added it needed to be able to compete globally on a cost basis.

“Our mining industry is strong, we have a great reputation, we have great products and we have great innovation when required, so I think we’re as strong as anyone,” he said.

“We need to balance that with making sure we can compete on a cost basis with countries like Indonesia and Columbia for example.

“But we’re an innovative type of country which can continue to compete globally.”

For the latest news click here

Follow on Twitter