PERTH (miningweekly.com) – The continued fall in commodity prices was likely to see more projects being scrapped, advisory firm Deloitte Access Economics reported this week.
In fact, the 'project graveyard' was expected to expand faster than the project pipeline and, with the majority of Australia’s liquefied natural gas (LNG) projects set to wrap up over the next year, the divide between the discarded projects and the project pipeline was expected to widen.
“The forward agenda is littered with challenges and the glory days of the investment boom are gone,” said Deloitte Access Economics partner Stephen Smith.
Overall, the value of projects in the Deloitte’s Investment Monitor database rose by $8.1-billion to $820.4-billion during the June quarter – a 1% rise from the previous quarter, but 6.3% lower than the level recorded a year earlier and $100-billion, or 12.2%, lower than the peak reached in 2012.
Smith noted that the value of definite projects - those under construction or committed - in the database, decreased by almost $14-billion over the quarter, equivalent to a 3.2% fall. That has seen the value of definite projects reach their lowest value since the end of 2011.
The value of planned projects - those under consideration or possible - in the database, increased by $21.7-billion in the June quarter, ending the slide that took out more than 13% of the value of the pipeline over the last year.
Smith pointed out that total private construction work was down by more than 13% over the past year. In real terms, engineering construction activity had now contracted for six straight quarters and the trajectory of the contraction was set to steepen.
However, he added that the fundamentals were beginning to stack up for the commercial construction sector. Higher asset prices were lifting household wealth, low interest rates resulted in cheap capital, and a lower Australian dollar was providing a competitive boost to export sectors.
Despite the upturn, Smith said the good news was yet to manifest as increased commercial construction work.
He pointed to data from the Australian Bureau of Statistics, which showed commercial construction activity grew only modestly in 2014, and remained at about the same level as it was at the time of the global financial crisis.
The value of commercial projects classified as under construction in the Investment Monitor database fell by 11% in 2014.