PERTH (miningweekly.com) – The value of Australian resource projects either committed or already under construction fell by 2.5% quarter-on-quarter in the three months to March, on the back of declining commodity prices, advisory firm Deloitte reported on Thursday.

In its latest Investment Monitor, Deloitte noted that overall the value of projects in the database fell by A$21-billion during the March quarter to A$812.3-billion. This was 7.6% below the level recorded a year earlier. 

The value of definite projects in the database, those either under construction or committed, decreased by A$4.2-billion over the quarter, equivalent to a 1% fall.  Measured against the same quarter last year, the value of definite projects was down by 2.1%. 

Deloitte noted that the value of planned projects in the database, those under consideration or possible, contracted further during the March quarter, with the A$16.8-billion decline consolidating a larger fall over the December quarter. 

“Global commodity prices – the tonic that underpinned the ramp-up in investment – are falling, and have now declined to a point that is limiting the returns on past investment, as well as putting a stop to new investment opportunities. 

“Australia is now well and truly into the export phase of the boom, a period where the returns on past investments are cashed in. This was supposed to be the payoff, both for miners who invested vast sums expanding production capacity, and for the Australian economy overall.  But economic growth remains below trend and national income growth is truly in the doldrums,” Deloitte said on Thursday.

The advisory firm noted that the exceptional demise in commodity prices was proving a bigger challenge during this structural shift than was anticipated. 

During the past 12 months, the spot price for iron-ore had fallen by over 60% and was currently under $50/t, while gas prices were also under pressure given falling oil prices, and the ramp-up in liquefied natural gas (LNG) exports was only just beginning.

Deloitte pointed out that over the next year, two additional facilities on Curtis Island would add to production from facilities off Gladstone, while on the west coast the first exports were also due from the $61-billion Gorgon LNG project. 

“The scale of activity is staggering. Over the next year alone, Australia will add 41-million tonnes a year of LNG production capacity – equivalent to about 17% of current global demand.  And there’s plenty more to come. Another 21-million tonnes will be available by 2017 following the completion of the Ichthys LNG project.”

Deloitte noted that Australia had bet the house on the expectation that emerging Asia’s appetite for the country’s resource commodities would be ongoing, adding that around 95% of Australian LNG exports end up in either China or Japan.

“Those countries are also the primary destinations for Australia’s coal and iron-ore exports, and China’s changing model of economic growth will not support the same level of demand for commodity inputs into production and investment into the future,” Deloitte warned.