QUEENSLAND’S resources sector is beginning to regain its global competitiveness, according to the latest State of the Sector report released by the Queensland Resources Council.
QRC members report that their hard work to cut costs has seen them push back down the global cost curve, with 43 per cent now in the lowest quartile, compared with 19 percent a year ago.
Chief executive Michael Roche said one of the iron laws of an export industry was that while the world sets our prices, we set our costs.
“The pain of cost cutting has certainly paid dividends for many of our companies, however the proportion of operations in the top two cost quartiles has increased from 19 per cent to 28 per cent, putting these operations at risk,” Mr Roche said.
“For the oil and gas industry, the story is much more positive. Compared with a year ago, Queensland now has 20 per cent of oil and gas operations in the bottom 25 per cent of global costs and 60 per cent in the bottom two quartiles.
“The softening of the Australian dollar, with most contracts negotiated in American dollars, has also assisted our sector.
“However, it shouldn’t be forgotten that, at current spot prices, 43 per cent of Queensland’s thermal and 5 per cent of coking coal production is loss-making.”
Mr Roche said key service providers such as rail, port, water and power are still earning good returns on the back of ‘take or pay’ contracts where mines pay for contracted capacity regardless of whether it is used.
“I know the Queensland Government is watching on with interest,” he said.
“With their royalties set against sale prices, every fall in commodity prices drags down royalty revenues. Such reality confronts Treasury as they work towards the 14 July state budget.”
The latest State of the Sector report also provides QRC’s first overview of the performance of the Palaszczuk Government, providing a “mostly steady as she goes” rating.