Energy Industry Set To Soar in 2018
As Australian companies welcome the New Year, IBISWorld’s business information analysts have revealed the top five industries expected to grow – and shrink – in 2017-18.
The top predicted performer for 2017-18 is the Wind and Other Electricity Generation industry with a bumper year of 35.3% growth anticipated. IBISWorld anticipates that Sports and Recreation Facilities Operation, Dairy Cattle Farming, Petroleum Exploration and Nature Reserves and Conservation Parks will round out the top five best performers.
At the top of the list of industries facing a less fortunate 12 months is the Motor Vehicle Manufacturing industry with revenue projected to decline by 43.1%. Other industries anticipated to face revenue declines include Intellectual Property Leasing, Outdoor Vegetable Growing, Sugar Manufacturing and Concreting Services.
|Industries to fly||Revenue 2016-17
|Wind and Other Electricity Generation||1,770.0||2,394.8||35.3%|
|Sports and Recreation Facilities Operation||1,453.6||1,588.2||9.3%|
|Dairy Cattle Farming||3,982.5||4,301.3||8.0%|
|Nature Reserves and Conservation Parks||1,554.2||1,650.9||6.2%|
Wind and Other Electricity Generation
The closure of ageing coal-fired power stations, supply constraints and rising gas prices in the eastern states have all wreaked havoc on electricity markets over the past two years. The electricity service price is projected to increase significantly this financial year – especially in South Australia and Victoria, the country’s two largest producers of wind power.
“We’re predicting massive growth of over 35% for this industry, with renewable energy operators in Victoria and South Australia likely to take advantage of rising prices to boost their revenue,” states IBISWorld Senior Industry Analyst William McGregor.
Sports and Recreation Facilities Operation
Revenue for this industry is expected to grow by 9.3% in 2017-18, to reach $1.6 billion. IBISWorld anticipates this year’s Gold Coast Commonwealth Games will play a huge part in boosting this sector with several new purpose-built facilities such as the Anna Meares Velodrome and Carrara Sports and Leisure Centre coming into play, alongside the redevelopment of a number of others, including the Optus Aquatic Centre and the Gold Coast Hockey Centre.
“We believe the availability of these stellar new facilities, together with ticket sales from these venues will be major contributors to industry growth. An expected rise in sports spectating and growing spend on recreational and cultural activities will also contribute to growth,” said Mr McGregor.
Dairy Cattle Farming
According to IBISWorld, this should be the year the Dairy Cattle Farming industry bounces back. Following a year of low prices and depressed milk production, conditions have begun to stabilise, while demand and returns for domestic dairy products is rising.
“With the Australian dollar projected to depreciate this year, we anticipate local dairy products will become more competitive in export markets, boosting returns to domestic milk processors, which will then flow through to dairy cattle farmers. We’re also expecting an increase in the size of the national dairy cattle herd, which will drive up milk volumes, and contribute to an expected 8.0% increase in revenue in 2017-18,” said Mr McGregor.
IBISWorld expects revenue in the Petroleum Exploration industry to increase by 7.2% in 2017-18, to reach $1.5 billion. This growth is expected on the back of three years of consecutive revenue declines, including a 53.0% drop in 2015-16, due to a decline in the global price of natural gas.
“As Australian households have had to compete with international consumers for gas supply, household gas prices have increased. This year, the electricity service price, a proxy for domestic natural gas prices, is tipped to surge by 15.4%, spurring renewed expenditure on petroleum exploration, which rose by 7.1% during the year to September 2017,” said MrMcGregor.
“A number of major petroleum production players have announced new budgets for exploration, including ExxonMobil, which has major investment plans for Bass Strait. There’s also a high likelihood growing pressure on the eastern seaboard energy market may prompt authorities to roll back regulation on coal seam gas extraction, which would lead to growth in petroleum exploration.”
Nature Reserves and Conservation Parks
IBISWorld attributes rising revenue for this industry to growth in domestic and international tourism, which is increasing government funding for ecotourism activities. “In addition, the relative weakness of the Australian dollar has increased the cost of holidaying overseas for Australians and decreased the cost of visiting Australia for foreigners – both of which benefit local ecotourism. We anticipate growth in admission fees, sales, and government funding to boost industry revenue by 6.2% this year, to reach $1.7 billion,” said Mr McGregor.
|Industries to fall||Revenue 2016-17
|Motor Vehicle Manufacturing||7,959.7||4,532.0||-43.1%|
|Intellectual Property Leasing||4,117.0||2,825.7||-31.4%|
|Outdoor Vegetable Growing||6,032.9||5,216.1||-13.5%|
Motor Vehicle Manufacturing
The high comparative cost of Australian vehicle manufacturing, together with changing consumer preferences and increasing imports have had a devastating effect on local Motor Vehicle Manufacturing, which is expected to decline by 41.3% this year.
With both GM Holden and Toyota closing their domestic manufacturing plants during 2017, truck manufacturers Volvo, PACCAR and Iveco are now the major players in the Australian industry.
“While truck manufacturers are affected by the same tough trading conditions as passenger car makers, there is an element of protection for those designing and building trucks specifically for Australian conditions, such as transporting heavy loads over long distances in high temperatures. With truck manufacturers now the key players in our domestic motor vehicle manufacturing sector, the industry’s future performance is set to rely more on business confidence than consumer sentiment in years to come,” said Mr McGregor.
Intellectual Property Leasing
Intellectual Property Leasing industry revenue has been extremely volatile in recent years due to the irregular auction of spectrum rights.
“The main bidders for spectrum rights in Australia are telcos, such as Telstra, Optus, Vodafone and TPG, with the latter purchasing rights for $1.26 billion in April 2017. This is expected to lead to a 31.4% decline in industry revenue in 2017-18, during which no spectrum auctions are expected to occur,” said Mr McGregor.
Outdoor Vegetable Growing
While the value of vegetables grown this year is predicted to increase slightly due to strong potato and onion output, the anticipated drop in domestic pulse production (chickpeas, peas, lentils, broad beans, lupins and mung beans) will hurt the industry’s overall performance, with revenue expected to decline by 13.5%.
Record pulse output in 2016-17 means that although this year’s production is still projected to be high, revenue will decline this year, with lower yields hurting pulse growers’ revenue.
An expected oversupply in global sugar markets is tipped to drive sugar prices down this year, with IBISWorld forecasting revenue for sugar manufacturers to decline by 12.5%. “Domestic sugar output is projected to decline this year following the bumper crops of 2016-17, and with two-thirds of Australian sugar destined for export markets, global conditions – including consumption not matching production growth – will contribute to revenue declines for local sugar millers,” said Mr McGregor.
Weak demand from most infrastructure markets, coupled with an expected decline in residential building markets will contribute to deteriorating conditions for concreting services in 2017-18, and cause revenue to decline by an estimated 6.4%.
“An oversupply in several major metropolitan markets and a slump in construction of large-scale apartment complexes will stem demand for concreting services in the residential sector for the time being, with the main stimulus this year coming from stronger demand from the commercial sector, as well as escalating activity on major transport projects including the WestConnex and NorthConnex in Sydney. While these projects will keep large-scale concreting firms busy, smaller operators are unlikely to benefit, because they lack the capital and workforce resources required to compete for these large projects,” said Mr McGregor.