A new IBISWorld report has highlighted petroleum refining, contract mining, and diamond mining as the country’s fastest declining industries in 2016.
Petroleum refining is slated to shrink 16.7 per cent this year, with industry revenue to decline at compound annual rate of 7.7 per cent over the five years through 2015-16 to sit at $19.1 billion.
In little surprise, as the mining industry declines contractor and support services are predicted to decline in line with the sector and as operators look to in-house production rather than outsourcing services.
The industry is highly dependent on trends in mining activity, particularly black coal and iron ore mining activity, as these are Australia’s largest resources in terms of both volume and value,” according to IBISWorld senior industry analyst Spencer Little.
“As commodity prices have fallen, many mining firms have ceased expansion and exploration projects, and instead shifted their focus to production.
“This has been to the detriment of contract miners in the industry, as many services that were previously contracted out have been brought back in house,” Little said.
IBISWorld forecasts a 6.3 per cent decline in contract mining, engineering, and services companies revenue down to $11.2 billion.
This follows the sharp 14 per cent decline in revenues recorded last year.
Diamond mining is also slated to fall, after a short rally in 2014, when it saw a 24 per cent growth in revenues.
Instead the industry is predicted to experience an annual compound decline of 4 per cent over the five years through 2015-26, to fall to $380.1 million.
“The industry’s performance has been volatile over the past five years, due to fluctuating production volumes and prices; a significant drop in revenue in 2013-14, and another expected fall in revenue in 2015-16 are expected to underpin the industry's poor performance over the period, “ IBISWorld stated.
This fall, while in line with the general decline in mining, has been precipitated by Australia oversupplying the market.
“As a result, the industry is heavily export-oriented and industry players depend on global demand for diamonds. According to the Department of Industry, Innovation and Science, in 2013-14 export volumes of Australian diamonds dropped from 12.2 million carats to 10.4 million carats,” IBISWorld added.
“Industry operators also face strong competition from imports, which account for a large proportion of total domestic demand,” Little said.
The exit of Kimberley Diamonds, previously a major industry player, is expected to negatively affect the industry’s performance in 2015-16.
In July 2015, Kimberley Diamonds announced that it had ceased its local diamond mining operations at its Ellendale site and entered into voluntary administration.
This exit is expected to cause a major dip in diamond production volumes and contribute to a 13.3% decline in industry revenue in 2015-16.
There has also been additional shakeup in the diamond industry, with the announcement today Rio Tinto’s head of diamonds and minerals, Jean-Marc Lieberherr, has stepped down, to be replaced by the current head of salt and uranium, Simon Trott.