Revenue generated by the contract mining services sector in Australia is expected to rise at an annualised 3.2% to reach $17.4 billion over the five years through 2023-24, despite facing headwinds.
According to research firm IBISWorld, this result comes amid easing commodity prices in some markets, tight labour market conditions, and inflationary pressures constraining industry activity.
Growth in Australia’s mining sector has underpinned demand for contract mining services, with iron ore production volumes in particular growing, driven by strong demand from China.
Australia’s iron ore export volumes moderated in the March quarter due to a combination of weather disruptions, and maintenance and capital works at key operations.
According to the Department of Industry, Science and Resources’ (DISR) latest issue of its Resources and Energy Quarterly: June 2024, as more greenfield supply comes online from existing and emerging producers, iron ore export volumes are forecast to increase by 2.3% annually over the next two years.
However, lower prices projected over the outlook period will reduce Australia’s iron ore export earnings from $138 billion in 2023–24 to $114 billion in 2024–25, and $102 billion in 2025–26.
According to the Australian Bureau of Statistics, mining contributed a record $455 billion in export revenue for Australia in the 2022-23 financial year.
However, subdued demand for contract services from some parts of the mining sector has weighed on industry revenue over the period. As such, some industry players have faced difficult operating conditions over the past five years.
While conditions improved over the two years through 2020-21, the pandemic created significant volatility in downstream markets and caused disruptions to industry operations that many companies are yet to recover from, IBISWorld notes.
“Despite this volatility, strong demand for Australia’s mineral resources in export markets has supported mining activity over the past five years,” the research firm reports.
There has been a 24% contraction in global exploration activities with S&P Global forecasting exploration budgets will decrease by about 5% this year.
Commenting on the mining services market, Paul House, CEO at Mining technology company Imdex (ASX:IMD) believes the medium to long-term view of the sector are extremely attractive.
“The underlying demand for metals is expected to increase. Reserves are being depleted in every commodity everywhere around the world, so if we are to meet whatever demand looks like for each of those commodities, we actually have to prove up more reserves,” he tells Mining.com.au.
“To prove up more reserves a company can fix that by M&A in the short-term but overall, for society – or for the sector as a whole – you actually need to drill more holes.”
Imdex achieved record revenue of $445.3 million during the 2024 financial year, representing an 8% increase from 2023. The company also achieved record earnings during FY24 of $112.9 million, a 12% increase from FY23.
Write to Adam Orlando at Mining.com.au
Images: Imdex
