Resources contracts start slow in FY20

CONTRACTS in the resources space have gotten off to a slow start for the 2020 financial year analysis by Argonaut Securities has found.
Resources contracts start slow in FY20 Resources contracts start slow in FY20 Resources contracts start slow in FY20 Resources contracts start slow in FY20 Resources contracts start slow in FY20

Koodaideri is one of the major development projects ongoing in Australia's resources sector.

Argonaut analyst Ian Christie said there had been much more infrastructure-related work awarded to ASX-listed contractors than resources work so far this financial year.

The firm said the amount of resources-related work had been disappointing and "below our expectations given the large iron ore projects underway".

BHP is building the US$3.6 billion South Flank project, while Rio Tinto is developing the $2.6 billion Koodaideri project and last week flagged significant expenditure ahead to replace depleting mines.

Fortescue Metals Group is building the $1.275 billion Eliwana hematite project and the $2.6 billion Iron Bridge magnetite project.

The major developments were expected to lead to a contracts bonanza, however, Christie said 67% of contracts won in the resources sector so far this financial year had been related to production, not construction, and mostly in coal rather than iron ore.

Just four contractors have won 80% of the work awarded so far. CIMIC Group has picked up 43%, NRW Holdings 19%, Monadelphous 13%, and Perentie Global 7%.

Argonaut has tracked A$3.3 billion of contracts awarded so far to ASX-listed contractors.

FY19 was the best year for contracts since FY14 when $15 billion of resources contracts were awarded, while FY15 was the bottom of the market with less than $5 billion of resources work awarded.

FY11 was the best year this decade for resources contracts with more than $30 billion awarded.