Construction on rocky grounds as mining investment falls

There has been a slump in investment in the construction industry as a number of mining projects were put on ice this year, according to a new report.

The Infrastructure Partnerships Australia and BIS Shrapnel Civil Infrastructure Metric looks at about 20 of the largest civil construction companies and collects samples of the work they are winning each quarter.

According to the report, mining and heavy industry work won by the construction sector slumped to an index reading of 40.1 in the March quarter. That is the lowest level since the Metric series began in March 2010.

“Mining and heavy industry work won continues to be lumpy around a general downward trend,” the report said.

The report suggests the Metric index slump comes as new project opportunities are becoming scarce as many existing projects are being shelved this year.

The projects are being deferred due to the downturn in China’s economy. Weaker public sector investment is starting to detract from growth.

IPA chief Brendan Lyon said the end of the mining boom resulted in the slump in construction, according to the SMH.

Another reason was government’s reluctance to take on more debt and chance budget deficits, he added.

“New investment in public infrastructure has been declining since 2010 and appears to have been in free-fall over the past nine months, as states rub up against their debt ceilings, and Canberra tightens its purse strings,” Lyon said.

“The Metric also suggests that new mining investment has plummeted over the last three quarters, having peaked midway through 2012.

“Coupled with the retreat in public infrastructure investment, it explains the hard terrain facing the nation’s construction workforce and the softening demand for labour and skills.”

The report looked at civil works as measured by ABS data. But it noted the ABS data has been fluctuating on a quarter-by-quarter basis as it was influenced by multi-billion dollar LNG projects in Queensland, Northern Territory and Western Australia.

A BIS Shrapnel report in April highlighted how the mining slowdown is trickling into the engineering and construction sectors.

The report said investment for large-scale projects had hit a peak, and it would decline over the next five years and take a decade to bounce back.

The year before, it released a report which forecast an end to the mining-driven civil construction boom in 2015.

BIS Shrapnel said the pending mining work, which stands at over $80 billion in the December 2012 quarter, will maintain work done at or near record rates over the coming quarters.

But work will taper to an average of $15.1 billion per quarter over 2013/14 following project completions and deferrals.

That is $60.4 billion yearly. 

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