Good news for manufacturing as mining companies open their wallets

Analysis by Peter Roberts

A surprising and sustained strength in key commodity prices has brought cheer to manufacturing and maintenance operations supporting Australia’s commodities export industries.

While LNG gas prices are down and thermal coal is increasingly seen as yesterday’s fuel, prices for hard resources from iron ore to copper and gold are at very high levels.

This has in turn encouraged miners, who had previously clamped down on maintenance and expansions, to switch the tap back on again.

Especially encouraging is government infrastructure projects are beginning to flow through at the same time.

The new optimism is seen in the recent announcements by engineering companies such as the giant CIMIC group.

While noting there is still some Covid-19 hesitation, CIMIC has reason to be optimistic.

The company provides a full spectrum of services, from feasibility, design, planning and investment; to manufacturing and construction; to operations, maintenance, upgrades and asset management; to rehabilitation and decommissioning.

In the past 10 days the company has announced a string of new contract wins including:

  • A $128 million package won by its CPB Contractors subsidiary for a wet processing plant at Fortescue Metals’ Iron Bridge Magnetite project in the Pilbara
  • New works to raise the spillway at Bundaberg’s Paradise Dam for Sunwater
  • $200 million worth of contracts to its UGL offshoot for mechanical, piping, electrical, communications and instrumentation work for Rio Tinto at Mesa J PP2 rescreening plant in Western Australia
  • A contract extension for major shutdown work at Rio Tinto’s alumina refinery
  • Installation of a mine crusher and materials handling circuit at Roy Hill in WA
  • And appointment to BHP’s engineering services panel to provide civil, structural, mechanical, piping, electrical, instrumentation and rail services for WA iron ore mining sites.

In all CIMIC secured $4.9 billion of new work in the six months to June 30, bringing solid work on hand to $38.1 billion.

CIMIC Group Executive Chairman Marcelino Fernández Verdes said: “The mining market is proving resilient.

“The outlook across our core businesses remains positive, notwithstanding the impact from COVID‐19 which has led to a temporary delay in the award of new projects and slowed down revenues in certain parts of our business.”

Picture: Cimic

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