Tracking the trends with Deloitte 4 – Controlling Supply

Deloitte have released a list of the top ten industry trends we can expect in 2015. With a number of challenges faced by the sector this year, it’s important to stay a few steps ahead and pay attention to the indicators. As we all know, the mining industry is cyclical in nature, and despite the ongoing commodities downturn after the mining boom, the upswing is on its way; it’s simply a matter of when we will start to see this resurgence.

Australian Mining takes a look at each of these ten tips from Deloitte to see what’s in store through this ebbing year in the mining cycle.

Walking the supply demand tightrope

Massive production upscaling in Australia of iron ore and coal during the boom has left some in a difficult position.

Global surplus of commodities have driven prices down, and in the case of iron ore, it just keeps going down. The price has halved since the same time last year, from around US$120 per tonne down to just above US$60 per tonne.

This has been disastrous for several small miners, who have had to put mines into care and maintenance while they wait out the global slump in hope of more favourable times.

Exploration too has suffered, with budgets being cut around the world, and some operators pulling out of greenfield development altogether.

With the trend of downsizing and focussing on core business, the seemingly unnecessary expensive of greenfield exploration is one seems easy to cut, but this will have impact down the line.

Deloitte suggests that due to the downturn in exploration, new project pipelines have already begun to dwindle, and this could put the future of supply at risk.

While companies focus on production and cost cutting, there are fewer discoveries to feed supply in the future, and this may create a supply imbalance and tip the mining sector back into an unsustainable production cycle.