Actual capital expenditure on mining

IBISWorld forecasts actual capital expenditure on mining to edge downward by 0.2% in 2024-25, to $50.4 billion. In previous years, elevated prices for several commodities, including, oil, gas, coal and gold, drove capital expenditure into mining. However, a downward trend in the prices of various commodities, including sharp falls in minerals like nickel and lithium has reversed this trend. Several high profile nickel and lithium projects have been put on hold amid a steep decline in the global price of nickel and lithium. Recent geopolitical and trade tensions are also diminishing some miners' optimism, deterring them from investing in new ventures. On top of falling prices, mining firms have faced elevated borrowing costs amid structurally higher interest rates on a global basis, which has made it increasingly difficult to finance capital expenditure. These intersecting trends are forecast to drive a dip in capital expenditure on mining over the year.

After falling significantly since 2012-13, mining investment has started to trend upward since 2019-20, driven by a radical shift in the global situation in the wake of the COVID-19 outbreak. The pandemic initially induced significant uncertainty, generating widespread volatility across global commodity markets. At the height of the pandemic, travel restrictions caused global transport activity and energy demand to fall sharply, leading to a decline in oil, gas and coal prices. Conversely, robust iron ore and gold prices supported capital expenditure by producers of these commodities during the pandemic. Overall, these mixed conditions led to capital expenditure on mining remaining flat up to 2020-21. Yet, as global demand picked up during the 2021 calendar year, supply chains struggled to keep pace and commodity prices started to surge. These trends were accelerated by the Russia-Ukraine conflict, which drastically disrupted global energy supplies and sent the price of coal and gas soaring. Responding to these trends, investors funnelled capital into mining projects, seeking to capitalise on an export boom. Elevated commodity prices, combined with post-pandemic surge in economic activity, were the key drivers of strong growth in the level of capital expenditure into mining since 2020-21.

Capital expenditure on mining has been exceptionally volatile over the past two decades. Economic growth and urbanisation across Asia, particularly China, has boosted demand for construction materials and other resources. Australia's proximity to these markets and its access to high-grade mineral deposits have bolstered demand for Australian commodities in Asian markets. These trends led to an influx of investment in new mines and export facilities, with capital expenditure on mining reaching a peak of $126.5 billion in 2012-13, in 2023-24 dollar terms. The completion of Australia's major liquefied natural gas (LNG) infrastructure has removed a major driver of capital expenditure on mining, leading to significantly lower levels of capital investment over the past decade compared with the mining boom period. Overall, IBISWorld forecasts actual capital expenditure on mining to rise at a compound annual rate of 4.0% over the five years through 2024-25.