Overview
It was a dynamic year for the resources industry in 2024, characterised by fluctuating prices and changing demand for exports. While the industry benefitted from high export volumes and strong investment in key commodities such as iron ore, Australia’s resource and energy export earnings eased. Export earnings for 2025 are expected to further fall by approximately 10% to $372 billion in 2025, down from $415 billion over the 2023–24 period. The decline is expected to occur because of combination of factors, including weaker global demand for coal, iron ore and gas, increased supply of key commodities, and inflation and rising costs, all of which have, and are expected to continue to, cause commodity prices to fall over this period.
Looking ahead, the industry is expected to face similar challenges arising from global demand shifts and evolving political landscape. The most obvious example of this volatility is the recent introduction of a 25% tariff on all imports of steels and aluminium (including steel and aluminium products) into the United States. The tariff (and accompanying conversations around possible exemptions) poses a fundamental challenge to Australia’s trade strategy and prime example of the rapidly changing environment in which all stakeholders in industry must do business.
Commodities update and outlook
Coal
There was strong demand for metallurgical coal from China and India in 2024, and long-term growth is expected to continue to outweigh domestic supply in those nations. Even so, long-term demand forecasts remain uncertain given wavering steel market conditions and declining international demand generally as more nations look to bolster their decarbonisations efforts.
Looking abroad, protectionist trade policies may present a risk to Chinese steel exports that will impact China’s demand for Australian coal. That said, India remains a key importer of Australian metallurgical coal alongside Japan, Germany, Vietnam, the Netherlands and Turkey, with volumes remaining relatively stable across these key importers. Amid the changing long-term outlook for coal on the global stage, markets have still been active to increase production capabilities, highlighting the complex balance between export activities and market realities. For example, 2024 saw approvals given for the expansion of the Boggabri Coal Mine (Idemitsu), Narrabri Mine (Whitehaven), Lake Vermont Meadowbrook Coal Mine (Jellinbah) and Vulcan South Coal Mine (Vitrinite).
Gas
The gas market steadied in 2024, compared to the supply shocks of 2022 and resulting readjustment in 2023. However, ongoing uncertainties around supply and demand have meant that market prices have been somewhat elevated.
The Australian Energy Market Operator’s Gas Statement of Opportunities for March 2024 forecast that as energy transition initiatives accelerate, gas will continue to be used by Australian households, business and industry and support the reliability and security of the electricity sector.[1]
In May 2024, the Federal Government released the Future Gas Strategy (Strategy), which acknowledges the critical role that gas will play through to 2050 (and beyond) as Australia strives towards net zero emissions. The Strategy sets out the Government’s approach to gas policy by way of six principles that will shape future government policies and actions. The Strategy underpins a wider understanding that continued investment and development of gas supply and transport infrastructure is critical to achieve decarbonisation efforts.
The guiding principles of the Strategy are:
- Australia is committed to supporting global emissions reductions – gas production and use must be optimised through the transition and residual use must be abated or offset.
- Gas must remain affordable for Australian users throughout the transition to net zero.
- New sources of gas supply are needed to meet demand during the economy wide transition.
- Reliable gas supply will gradually and inevitably support a shift towards higher-value and non-substitutable gas uses. Households will continue to have a choice over how their energy needs are met.
- Gas and electricity markets must adapt to remain fit for purpose throughout the energy transformation.
- Australia is, and will remain, a reliable trading partner for energy, including liquefied natural gas (LNG) and low-emissions gases.
Oil
Demand for oil was steady throughout 2024, although is expected to decline into 2025 and 2026. This is largely driven by the falling demand for transport fuels as vehicles become more efficient and electronic vehicles reduce the demand for petrol. Geopolitical tensions in the Persian Gulf are also expected to create volatility in the market moving forward.
Iron ore
Iron ore prices were volatile over the course of 2024: first starting off the year strongly, slumping to a two year low in Q3 2024 and then rebounding towards the end of the year. Improved prices towards the end of 2024 can be attributed to improved productivity and ongoing ramp ups of newer mines. The increase also followed a series of Chinese economic policy announcements aimed at lifting consumer and business sentiment and supporting economic growth. New infrastructure investment in China, as well as the measures by the Chinese government to alleviate weakness in the domestic property sector, are expected to drive support for construction and to support steel and iron ore prices going forward.
In 2025, ramp up of newer mines is expected to result in a 1.7% increase per year in exports over the two years. Global steel demand is forecast to grow by 1.3% per year between 2024-2026.[2]
Hydrogen
As part of the 2024-2025 Federal Budget, the Government announced its Future Made in Australia policy, designed to support the transition to net zero. The policy includes a $22.7 million investment in a number of key areas, including support for the hydrogen market through the introduction of the Hydrogen Production Tax Incentive and Hydrogen HeadStart program, which strive to incentivise the production of renewable hydrogen in Australia.
Specifically, the Hydrogen Production Tax Incentive provides a refundable tax offset of $2 per kilogram of eligible hydrogen produced between 1 July 2027 and 30 June 2040 for a maximum period of 10 years, designed to cover the current commercial gap between the cost of producing reviewable hydrogen and its market price. The Hydrogen HeadStart Program, on the other hand, is set to provide an additional $2 billion of revenue support for large-scale renewable hydrogen projects (producing hydrogen from renewable energy or derivative products). It is hoped that the initiatives will incentivise the production of renewable hydrogen and motivate producers to offer hydrogen at a competitive price.
Gold
Compared to other commodities, gold was a noticeable winner in 2024, as significant investment interest in gold remains. This is reflected in the number of gold projects that appeared in the 2024 Resources and Energy Major Projects Report, which indicated that as of 31 October 2024, there were 38 gold projects that were considered to have a value of $50 million (based on publicly available sources). This is up from 27 projects that met this threshold in 2023.[3]
Generally, the gold price was estimated to have averaged US$2,346 an ounce in 2024 — 21% higher than in 2023.[4] The increased prices are a result of a range of factors including the demand for ‘safe’ assets amid global conflict including the Middle East and Ukraine as well as continued central bank purchases.[5] Prices are expected to remain strong in 2025, but potentially ease slightly in 2026, in anticipation of higher gold mine output, lower central bank demand and reduced concerns over inflation.
Nuclear
Nuclear energy is experiencing renewed interest on a global scale, driven by the demand for low-carbon power to meet energy transition targets. The International Energy Agency has estimated that global nuclear power generation will grow by nearly 3% through to 2026. As it is, uranium mining is currently banned in all states and territories in Australia other than South Australia and the Northern Territory, which host the nation’s only three operating uranium mines. That said, ramp up of the recently re-opened Honeymoon mine in South Australia is reflective of widespread increase in demand for this alternative energy supply and the response from markets to meet those demands. Whilst nuclear energy has become subject of more public and political debate in Australia, it is yet to be seen whether there will be a change to the nation’s long standing ban.
Activity in the market
Notwithstanding the volatility experienced throughout 2024, the year saw an increase in the number of resources projects being developed nationally, with 455 major projects under development in the past year, up from 421 in 2023. As for existing projects, 2024 saw some of the biggest M&A activity to date. For example:
- Anglo American sold its Queensland metallurgical coal mines (Moranbah North, Grosvenor, Aquila and Capcoal) to Peabody for a cash consideration of up to US$3.775 billion;
- Glencore completed its purchase of steelmaking coal business, Elk Valley Resources, from Teck Resources Limited for a deal value of $2.4 billion;
- Paladin Energy acquired 100% of Canada’s Fission Uranium Corp for $1.14 billion by way of court-approved plan of arrangement under the Canada Business Corporations Act; and
- Whitehaven completed its acquisition of 100% of the Daunia and Blackwater metallurgical coal mines from BMA.
Although ultimately unsuccessful, BHP’s proposal to acquire Anglo American by way of a scheme of arrangements was a key feature of headlines in 2024. As was well-publicised at the time, the proposal comprised an all-share offer for Anglo American subject to the pro-rata distribution by Anglo American of its entire shareholding in Anglo American Platinum Ltd and Kumba Iron Ore Ltd to Anglo American shareholders prior to completion of the scheme of arrangement.
Future of resources – looking ahead
Looking ahead, the outlook for the resources industry is optimistic (albeit fraught with caution), there being general sentiment that resources and energy exports will continue to play an important role in supporting the energy transition, and while doing so, continuing to support jobs and provide reliable energy. While forecasts suggest that global prices are easing for some resources, the long-term outlook is positive as prices stabilise and demand from overseas economies such as India grows. The general decline in prices follows a period of boom for the industry and is to be expected as part of its cyclical lifecycle.
Ongoing changes in trade policies and changing political landscapes will invariably continue to impact the industry. That said, we expect that the sector will continue to demonstrate resilience to these macroeconomic factors – not only because history tells us it can, but because the transition to net-zero requires concerted support from all players in industry to reach decarbonisation targets and a low-carbon future.
[1] Australian Energy Market Operator’s Gas Statement of Opportunities for March 2024
[2] Ibid.
[3] Resources and Energy Major Projects 2024 Report – Office of the Chief Economist – Department of Industry, Science and Resources
[4] Resources and Energy Quarterly – December 2024.
[5] Resource and Energy Quarterly December 2024 page 74.
