Mining machinery sits idle as Australia prices itself out of projects
Exorbitant costs and the drying up of new developments have taken a severe toll on mining plant hire in the mineral-rich state of Western Australia.
Robert Gottliebsen writing for Business Spectator reports that Emeco (ASX:EHL), one of Australia's leading equipment providers, announced last month that competition in the sector had heated up with one third of its Australian machinery was sitting idle and unleased.
Until recently the mining boom enabled equipment providers to charge exorbitant rates to mining and mining supply companies with near impunity, while lucrative profits drew a bevy of new competitors into the mining plant rental industry and machinery orders steadily accrued.
In just the past year, however, plunging commodities prices and an expensive Aussie dollar have changed the situation completely.
Mining and mining supply companies who are fed up with extravagant hire fees have increasingly opted to purchase their equipment themselves, considering it more economical to operate their own machinery.
At the same time Australia has become now one of the most costly places on the planet to develop new mining projects, leading to a lack of new developments and even more constricted business opportunities for equipment leasing.
According to Gottliebsen, while notorious iron ore magnate Gina Rinehart is still expected to go ahead with her Roy Hill iron ore project in the Pilbara, few other new projects are proceeding as "Australia has priced itself out of the market."