Firm Chinese steel production is expected to underpin a rise in capital expenditure (capex) in Australia on expanding iron ore output capacity, the Reserve Bank of Australia (RBA) said, which in turn will support an increase in investment spending across the resources sector.
Information from the RBA's capex survey and the bank's liaison programme indicate that investment is expected to increase slightly over the year ahead as work on iron ore and coal projects increase, although growth is expected to be more moderate than was anticipated at the start of the year.
Future mining investment is expected to ease as a result of less work on iron ore and coal projects, along with the deferral of final investment decisions on some large LNG projects, Australia's central bank said.
Australia's three largest iron ore producers Rio Tinto, BHP and Fortescue Metals Group are all investing in new production capacity, with much of it replacing existing mine capacity, which is nearing exhaustion. Australian iron ore exports hit a record high in June, as firm demand from China offset the effects of the economic slowdown in other key markets and as Australian producers filled gaps left by lower Brazilian exports.
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