Coal-seam gas among industries tipped to shine this year
THE coal-seam gas extraction industry is likely to be among the best performing in 2015, according to research firm IBIS World.
EVEN as global crude oil prices have collapsed in the last few months, there may still be some good news to salvage for Australia’s energy sector this year.
The coal-seam gas extraction industry is likely to be among the best performing, according to research firm IBIS World, along with fast fashion, online grocery, private equity and hydroponic crop farming.
However, electricity distribution, mining equipment makers and cigarette manufacturing are likely to be among the laggards this year, IBIS World analysts said in a report.
With the first of the Queensland liquefied natural gas conversion plants starting export shipments this year, to be followed by two other plants, the coal-seam gas extraction industry moves from a construction to production phase. As a result, the industry’s revenue is forecast to jump 148 per cent to $1.83 billion in 2015.
“While coal-seam gas projects have become more viable due to new and improving extraction techniques, it is the development of export capabilities that is expected to drive rapid industry growth,” the report said.
The Queensland facilities are expected to provide the industry access to international markets where prices for gas are over three times higher than the domestic market. Most of the Australian gas will head to Japan, China and South Korea — the world’s three largest natural gas importers.
On the other hand, the petroleum exploration space is expected to contract this year, as lower oil prices make exploration projects less viable for Australian firms. IBIS World analysts are forecasting a 19 per cent fall in revenue to $3.76bn in 2015, with Australian companies increasingly not able to compete with low production costs and high volumes from the world’s major oil producers.
With global fashion retail giants such as Zara and Topshop having set their sights on the Australian market in recent years, the sector has been in the spotlight, and 2015 is expected to carry forward that growth momentum.
Zara, which has posted fast-paced revenue growth over its first three years in Australia, is expected to continue its phenomenal growth. 2015 will also be the first full calendar year of Australian operations for H&M, Uniqlo and Forever 21, and the combined effect of this will be projected industry revenue of $1.35bn, a growth of 10.4 per cent over the year, the report has estimated.
Online grocery shopping has been slow to catch on in the Australian market, at odds with the trend in local online shopping, which has been quite popular. However, as consumers become more adept with the online experience, and with increasing options and greater comfort in purchasing perishable items like fresh fruit online, revenue in the segment is expected to jump nearly 15 per cent in 2015, IBIS World is forecasting.
It is not all good news, however. Among the major industries expected to report weaker performance this year is the electricity distribution sector.
As the cost of retail energy has surged in the past few years to cover for high capital costs, consumer demand has gradually declined and the regulator has slashed revenue limits. Both factors are likely to lead to an overall industry revenue decline of 10 per cent in 2015, to $16.7bn, the report said.
Similarly, as the mining boom comes to a close and as prices for coal and iron ore slump in the past few months, mining companies have been forced to slash capital expenditure and cut revenue growth expectations for the year. As a result, demand for mining machinery is expected to fall this year, leading to a forecast revenue decline of 6.1 per cent to 5.09bn.
The 60-year old cigarette manufacturing industry is also expected to be singed in 2015, as rising taxes and the advent of plain packaging take their toll. The industry is expected to report a 11.1 per cent fall in revenue, mainly as a result of Philip Morris shifting manufacturing to its Korean facilities.