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Defying the ‘depressive commodity super cycle’

Welcome to 2016! What kind of year beckons? Will it be one of innovation and growth? For the quarrying industry, will 2016 mark the beginning of an infrastructure boom? Damian Christie warns there are plenty of challenges ahead - both home and abroad ...

A web-based international mining investment publication ran an article in January that implied we still have an uphill battle ahead. It discussed the “depressive commodity super cycle”, that there have been four peaks in the global commodity cycle in the last 130 years. Each super cycle has occurred 30 years apart from the other, beginning with a surging decade, followed by a collapse of five years and then a slower decline of 15 years. In the last 100 years, the peak years were 1917, 1951, 1980 and 2011. The troughs were 1931, 1971 and 2002.

The author of this piece, Mike Schussler, concluded that if history is a guide, then the next trough will be in 2030. Should we accept this as gospel – or should we challenge ourselves to defy history?

Schussler’s pessimism is reflected in other sources. Roy Morgan Research’s Business Confidence survey shows that Australian business confidence in January was low, having dropped 7.3 per cent in the last quarter of 2015. The Ai Group/Housing Industry Association’s Australian Performance of Construction Index reports that the construction industry ended 2015 in negative territory after four months of expansion. Ai Group chief economist Julie Toth remarked that the lack of “meaningful growth” in commercial construction did not bode well for 2016.

This news is of concern to the quarry industry because declining commercial construction is essential to aggregate demand. It’s also a challenge for the mining equipment, technology and services suppliers that now make up a significant proportion of the IQA’s membership. How do you offer attractive, value-added, cost-effective products when your customers are themselves conserving resources because of low demand?

The obvious answers lie in innovation and diversification. As Metso Australia’s vice president for capital equipment Max Wijasuriya recently remarked, suppliers will need to add unprecedented value to their customers through “technology, innovation or different problem-solving approaches”.

It was also suggested that a huge opportunity for suppliers will come when the mining industry decides to start spending again on making its assets more productive. When that will happen is anyone’s guess but the advice is that suppliers need to be prepared for a revival in demand.

Government also has its part to play in inspiring the construction materials sectors. South Australia is talking up its part in funding numerous infrastructure projects this year (see page 10) and the Federal Government has released its exposure draft legislation for the $5 billion Northern Australia Infrastructure Facility for 2015-16. That’s on top of a pipeline of $125 billion in infrastructure investment to 2020 by Commonwealth and state governments (according to the 2014 Federal Budget).

Of course, we’re yet to see the activity to match this promised funding. Governments must take a lead in rebuilding business confidence. And that’s where 2016 becomes critical – it’s an election year, perfect timing for the construction materials sector to make MPs aware that the lack of progress is intolerable.

But the construction materials sector also needs to show leadership. As I wrote in this column 12 months ago, perhaps the time has come for the quarry industry to re-evaluate its role as a provider of raw materials. Maybe the industry needs to be a more proactive generator of capital to build infrastructure – and perhaps this may open the door for suppliers to develop more innovative products.

If we’re to overcome the dreaded “depressive commodity super cycle”, then everyone – governments, construction materials operators, and suppliers alike – must lift their game in 2016.










ABOUT THE AUTHOR
Damian Christie
Editor • Quarry Magazine

Damian Christie is the editor and a chief writer of Quarry magazine. To contact Damian, please click here.








Thursday, 18 October, 2018 05:31am
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