Galileo Mining Delta Blues nickel copper prospect

Mining suffers biggest increase in late payments over past year

Labour shortages, an unfavourable exchange rate, inclement weather in parts of Western Australia’s mining regions, and a slump in lithium and nickel prices has led to a 74% increase in the rate of external administrations over the past 12 months.

The March 2024 CreditorWatch Business Risk Index (BRI) reveals that across all industries external administrations are now at a record high as Australian businesses continue battling cost pressures, skilled labour shortages, and declining consumer demand.

Although the economy benefits greatly from the mining sector, at an individual business level trading in the resources sector is not immune to high levels of risk. 

According to CreditorWatch, this is because small businesses can be reliant on mines in a particular area, and should that project be shutdown or wound down, there are severe ramifications for nearby peripheral businesses supplying that mine.

At an industry level, food and beverage services have the highest risk of business failure, however, mining has experienced the biggest increase in late payments over the past year by a considerable margin. 

While down slightly from a record high in February 2024, B2B payment defaults are also surging, up 22.6% year-on-year indicating that many companies are finding it increasingly difficult to pay outstanding invoices.

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Of the more than 15,000 tax debt default records CreditorWatch currently holds from the Australian Taxation Office (outstanding debts of more than $100,000), almost 24% of businesses are in the construction industry, followed by 12.5% in professional, scientific and technical services, and 10.7% in food and beverage services.

CreditorWatch Chief Economist Anneke Thompson says despite the large month-on-month increase in the average value of invoices, trading conditions remain challenging for most SMEs, particularly in the mining, construction, retail trade, and food and beverage industries.

She says of particular concern is the continued high level of trade payment defaults and the growing number of companies being unable to meet supplier payments on time.

CreditorWatch CEO Patrick Coghlan does not expect business conditions to improve markedly until consumer spending increases. He says the rise in external administrations is somewhat a reflection of increasing cost pressures on businesses and growing cost-of-living pressures.

Coming off a tough year in 2023, there could be light at the end of the tunnel for the lithium market as a rally behind the vital battery metals begins to take shape. 

As reported by Mining.com.au, lithium prices have begun to climb from their recent slump around the US$14,000 per tonne mark, closing at about US$16,186 on 14 March 2024. Although it was only a day later the price fell back to roughly US$15,769 per tonne. 

As of 19 April 2024, lithium was trading at about US$15,260.

Nickel futures rose above US$19,000 to their highest since September 2023, on the back of talks of the Chinese government buying and fears of lower supplies. 

At the same time, worries have resurfaced over output since the world’s leading producer Indonesia was still reviewing applications for mining quota but has not issued all permits. Nickel is poised for an upswing, driven by earlier decisions by the US and UK to ban the delivery of newly made Russian nickel to LME and CME.

Write to Adam Orlando at Mining.com.au

Images: Galileo Mining & Peel Mining
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Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.