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Resources construction activity maintaining upwards momentum that began in 2022/23
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Total resources construction commenced an upturn in 2022/23, following a decline of over 50%, in real terms during the previous four years. 2023/24 saw a strong rise of 20% in construction activity due to broad based strength in gas/LNG, along with coal, iron ore, critical minerals and various heavy industrial processing sectors. Total resources construction will lift to a peak of $35 billion in work done in 2025/26 (in constant 2021/22 prices).
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In the short term, the share of oil/gas and coal sectors in total resource construction will remain at historically average levels. However, in the longer term, the use of coal is set to decline considerably, reducing its share of total new resources construction. Globally, gas is expected to maintain or grow its demand for at least the next decade due to its planned use as a firming tool in electricity networks, keeping construction activity strong.
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Critical Minerals Outlook
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Australia’s critical mineral sector has witnessed robust growth in recent years. The estimated value of construction work done in this sector reached $4.3 billion in 2023/24, up from around $1.2 billion in 2018/19 (in constant 2021/22 prices).
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However, price surges in 2021 and 2022 for many critical minerals has led to a drastic oversupply, as miners attempted to capitalise on high prices, primarily for lithium and nickel. This has resulted in a major depression in prices and the effects on construction activity have now started to be felt throughout the sector. Around $2 billion worth of planned construction work has now been cancelled or downsized in response to the current critical minerals price outlook.
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The Australian government has implemented a $7 billion dollar tax incentive which provides tax breaks for expenditure related to the processing and refining of critical minerals. Grants and debt facilities have also begun to be issued to individual projects which have been deemed in the national interest.
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While we expect construction activity in the critical minerals segment to fall 8.5% in 2024/25 and a further 9% in 2025/26, we don’t forecast a dramatic fall back to 2019 levels. Instead, we forecast a stabilisation at around $4 billion in work done annually over the long term, largely due to these government incentives.
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Current Coal Outlook
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Despite the long-term outlook for coal construction looking bleak due to global decarbonisation efforts, in the short term, we are forecasting a multi-year upturn. Construction activity rose in 2023/24 for the first time in over four years, increasing by 24.3%. Many coal mines are currently undergoing extensions due to above average coal prices.
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However, there is an increasing trend where coal mines are now being frequently challenged in the legal system to prevent construction and reduce emissions. Verdicts on decisions have gone both ways, yet these actions still drastically extend lead times and create uncertainty as to whether new coal projects will commence.
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Our most recent reports:
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Australian Construction Cost Trends
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This report examines the outlook for construction costs, in detail be sector and type of input.
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Australian Construction Projects Database
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This latest list of projects corresponds with our fully revised set of forecasts published in November 2023.
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Australian Regional Construction Outlook
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Our latest regional forecasts for residential building and construction have just been released.
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Australian Construction Materials Forecasts
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Our latest forecasts assess the implications for construction materials demand of the current outlook for building and construction.
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Australian Road and Bridge Works
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This report examines the strength and composition of the current upturn, and determines the likely timing of the peak, and subsequent decline.
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