Australia Mining Report Q2 2016 - New Report Available

Nickel and bauxite will emerge as the Australian mining industry's producti on growth bright spots during 2016 -20 20 . Coal and gold output growth will slow more markedly due to continued price weakness.

Although Australia will remain one of the world's largest mineral producers, growth will slow across the board due to continued mineral price weakness. The Australian mining sector will be particularly affected by China's economic slowdown, as the country accounts for almost 80.0% of the country's iron ore exports. We expect Australia's mining industry value to fall to USD86bn in 2016, down from USD96bn in 2015. We forecast Australia's mining industry value growth to pick up again by 2018, reaching USD94bn in 2020. Iron ore, for example, which accounts for 33.5% of the country's mining industry value, will increase its share to 36.3% of industry value by 2020 and drive industry growth.

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Latest Developments & Structural Trends

We forecast iron ore production in Australia to register average annual growth of 2.0% during 2016-2020 compared to 10.7% during 2011-2015.This is due to mothballing of mines from junior miners as iron ore prices remain weak as we believe that majors will stick to their production growth targets to crowd out high cost producers. Beyond 2016, iron ore production will start to slow from 4.9% in 2016 to -1.3% in 2020 on the back of low prices. We expect Australia to remain the top global producer of iron ore, with production increasing from 754 million tonnes (mnt) in 2016 to 792mnt by 2020.

Australian bauxite production will grow over the next few years due to the expansion of Rio Tinto's Weipa mine and the Amrun project that was approved in November 2015. The Indonesian export ban and now Malaysia's three-month moratorium on bauxite mining which will likely be extended will benefit Australia's bauxite sector by shifting investment to Australia. While bauxite accounts for only 5.4% of Australian mining value, the country is the global top producer, providing about 34.2% of global supply in 2016. Bauxite production will increase by an average of 6.0% per year by 2020, reaching 112.7mnt in 2020 from 90.1mnt in 2016. Rio Tinto's Weipa project will double the mine's production capacity by 2016, reaching 50.0mnt per annum, while the Amrun project will see an extra 10.0mnt per annum from the Queensland mine reaching a total of 22.8mnt per annum by 2019.

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