Macromonitor Latest Forecasts Newsletter
June 2022

Gas and Critical Minerals to Lead Next Resources Construction Upturn

Resources construction set for growth over the next 3 years

This note provides a summary of Macromonitor's new report - Australian Construction Outlook - Resources.

The resources construction sector experienced modest growth in both 2020/21 and 2021/22 (estimated). Outside the gas sector, recovery in construction has actually been underway for five years now. But from here, expansions and development of new gas facilities will join the upturn, driving activity significantly higher over the next few years.

Resources construction, excluding oil & gas, doubled between 2017 and 2021. Strong increases in iron ore, along with some selected other minerals, was initially the main contributor. The better than expected rebound in the world economy, post COVID, drove demand for minerals, lifted commodity prices and stimulated new construction.

The outlook for some key segments, such as iron ore and coal, is now quite weak however. But this weakness will be offset by large increases in segments such as LNG and critical minerals, such that overall resources construction will rise solidly, reaching peak levels in 2025.
Resources Chart

Gas and Critical minerals - Key Growth areas

Two key segments which are expected to be large contributors to growth over the next few years are LNG and Critical Minerals.

Oil & gas construction reached a long term trough in 2020/21, and a recovery is now in its early stages. We expect the value of oil & gas construction in Australia to increase from $4 billion in 2020/21 to a peak of just under $17 billion in 2024/25 (figures are in constant 2019/20 prices). This is still well below the previous peak of 2013 to 2016, however.

The gas upturn will be driven by strong demand from Asia and Europe, the need to replace depleting resources and maintain existing capacity, plus the effects of the Ukraine war on global gas supplies. In the short term, Australia cannot quickly increase the supply of LNG to replace Russian gas, but in the longer term, investment in new capacity in Australia is likely to benefit from a strategic imperative to diversify away from Russia.

Strong demand growth, allied with geo-political concerns, is also driving growth in Australian investment in critical minerals. Demand for this category of minerals is expected to grow significantly over the next few decades, due to higher demand for electronics and the shift to renewable technologies.

Notably, the United States, uncomfortable with an overreliance on their strategic competitor, China, for essential elements, is seeking to encourage investment in other source countries. The value of construction of critical minerals is expected to rise from around $400 million in 2020/21 to a peak of $4.2 billion by 2023/24.

Hydrogen - wild card

The wild card of potential growth segments is hydrogen. Our project database includes over fifteen major hydrogen-related projects, none of which are currently included in our forecasts for the next decade, due to uncertainty regarding timing and viability. These projects represent $13 billion worth of work, but most are in early development stages.

We currently expect these projects to begin boosting construction work during the 2030's, but the pace of development is hard to predict and, consequently, the hydrogen sector represents a large potential up-side to our forecasts of growth in resources construction in Australia.

Coal and Iron ore - weaker prospects

Construction in the coal segment is expected to decline for the third consecutive year in 2021/22, as a result of weaker demand growth, for both coking and, in particular, thermal coal. Australian coal exports are expected to remain weak, largely due to lower shipments to China and India.

Iron ore has been one of the strongest performing commodities since the onset of the pandemic. However, there are some headwinds that could affect iron ore prices and the commencements of new iron ore projects in Australia.
For more detailed forecasts and analysis please subscribe our report – Australian Construction Outlook - Resources - June 2022.

Our most recent reports:

Australian Construction Outlook - Resources

Australian Construction Outlook - Resources
Our new report examines the likely duration, speed and composition of the upturn currently getting underway in Australia's resources construction sector.

Australian Construction Outlook - Non-Residential Building

Australian Construction Outlook - Non-Residential Building
This report examines the current downturn underway in the non-residential building sector, describes its causes and forecasts the timing of the coming recovery, by sector and state.

Australian Construction Projects Database

Australian Construction Projects Database
This latest list of projects corresponds with our fully revised set of forecasts published in November 2021.

Australian Regional Construction Outlook

Australian Regional Construction Outlook
Our latest regional forecasts for residential building and construction have just been released.

Australian Construction Materials Forecasts

Australian Construction Materials Forecasts
Our latest forecasts assess the implications for construction materials demand of the current downturn in residential building, and the looming downturns in non-residential building and renewables investment.
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