One of the benchmark indicators of the strength of the mining sector is the huge support and services industries that attach themselves to Australian mining projects across the nation.
Despite the demise of a lot of mining supply businesses last year, a new report shows companies in the sector are quite optimistic about the March 2014 quarter.
As mining activity is still providing many thousands of Australians with permanent mining jobs on mine sites – the flow-on effect of this extends to the supply companies who in effect keep the mines operating by providing all manner of ancillary products and services.
75 per cent of companies said they expected sales revenues to increase in 2014
The Projectory Quarterly Survey of Business Expectations surveyed around 45 suppliers who service the Australian mining industry. Most of these suppliers were located in Western Australia, however, the report uncovered that nearly 75 per cent of companies who responded to the survey said they expected sales revenues to increase.
56 per cent of companies are very positive about making a profit
A large number of businesses (56 per cent) were very positive about making a profit for the quarter, with a focus on greater investment in marketing being a key factor for half of the businesses. Forty-two per cent of businesses however – intended to spend the same as the previous quarter.
Advertising was on the agenda for suppliers, with a strong focus of grabbing more eyeballs in a tough and competitive market. Companies seem to spend money on the company website, followed by direct mail, online advertising/content marketing, social media and search engine optimisation.
In some cases the budget would also stretch to trade shows, social media advertising, search engine marketing and editorials or white papers.
CFMEU Mining and Energy national research director Peter Colley said the optimism in the Australian mining services sector was “in accordance with union views”¯.
Colley explained that whilst the Australian mining “investment bubble”¯ is teetering out, production at many of Australia’s mines is increasing, indicating a demand on suppliers who deal in consumables, rather than big ticket items.
“the Roy Hill project going forward, that has saved a lot of companies”
BIS Shrapnel senior manager of infrastructure and mining Andrew Hart agreed with Colley that Australian mining suppliers, particularly in Western Australia, are set to benefit from a phase of production.
“With the Roy Hill project going forward, that has saved a lot of companies,”¯ he says.
He warns that while Australian mining companies such as BHP, Rio Tinto and Fortescue have ramped up investments, he doesn`t feel the “boom conditions” may return any time soon.
Iron ore mining forecast to grow 10% per year for 3 years
Hart says iron ore mining in Australia is forecast to grow from 545 million tonnes last year to 739 million tonnes in 2016.
“That is about 10% per annum growth for three years,”¯ he says. This is solid news for Australian mining support and services industry as the sector employs hundreds of thousands of employees as well as supporting local communities right across Australia.