As someone who lives in Mackay I have a fair idea of what is happening in the Bowen Basin. While the mining towns can sound promising, you will be paying capital city prices, both for out there and in Mackay, which is the industry hub. If you can afford that, then the rents can be worth it – according to one agent that I have spoken with recently rents out in Moranbah (the largest town in the Basin) are averaging about $1000/week. You need to consider that a number of the mining communities are owned by the mines (such as Glenden). Almost all of the communities are alike in design and facilities. The mines go to great effort to ensure that the workers have all the facilities that they need. I know that some towns have gyms, swimming pools, and various clubs, such as shooting clubs, sports clubs, and even a surf lifesaving club (despite being a couple of hours from the coast!). There is a significant increase occuring at the moment in the number of mines – there have been several open this year, with many others either being built, or in the planning stage.
As for outside of the Basin, Mackay is the city with the biggest gain to be had from the boom, as it is an industrial city, and has 2 of the state's major coal ports. Bowen has had an increase, courtesy of mining, as it also has a coal port – the same applies for Gladstone. Rockhampton and Townsville have been impacted upon to a certain extent, but nowhere near as much as Mackay, where house prices are just as high as the mining towns. The rents in Mackay, however, are nowhere near as high, but that is likely to change as there is a large number of people looking to rent, and there will be more coming to the city as more mines open.
Hope this helps those from outside the area who are interested in buying here.
Matt
BHP have taken over the New Saraji project and a contract has already been secured to export up to 10 million tonnes per year through the Abbot Point terminal, near Bowen.
Activity is strong in Bowen, even the so-called Iron Boomerang rail link, Shane Condon, is trying to sell his grand plan for a rail line from the Pilbara, in north-west Western Australia, to Abbot Point in north Queensland.
The $12.5 billion project is attempting to link Australia's coal fields with iron ore deposits, so the ore can be smelted into steel for overseas shipment, rather than just exporting the raw products.
Then there is the $400 million Bowen marina development about to start .
One problem will Bowen be able to handle the requirements such as time lines and resources to build the Chalco refinery and the Iron Boomerang at the same time.
I'm told the rental market is already limited on supply and work has only just began.
First there was going to be a 150 man camp just yesterday Boral who run the batch plant stated it was now heading towards a 500 man camp .Hi all,
Good to see lot's of positive comments on the Bowen area. I bought in Moranbah about 6 or 8 weeks ago.
i must admit I have been a bit concerned since then given what has been happening in the financial markets. I have been reading opinions saying that a slowdown would reduce the demand for steel, and then for coking coal (used for making steel). In particular people are saying China would stop importing. The worry of course being that BHP, Macarthur or Anglo might close their mines in the area, thus reducing (or nigh on eliminating) rental demand.
I think that about 70% (ish) of coal coming comming from Moranbah is coking coal based on: http://en.wikipedia.org/wiki/Coal_mining_in_Australia#Major_mines + checking the websites of those mines where volumes or coal type is not shown.
Is anyone else concerned about possible mine closures in the area? If so, what research are you doing to try and establish if this might happen?
Sorry to be the one to post something less postive. To balance the arguement: I have also read that demand for coking coal has increased a lot in India with no signs of closing. Also, China have reportedly been closing some of their mines down as they are not safe, preferring to import.
Thanks,
Its to early to say definitively but I think this statement below was the peak yes I know its iron not coal but the trend will be similar. How much demand drops no one know but the big guys are expecting a drop in earnings for 09 hence share prices down.
Australian iron ore exports in September up by 38% YoY
It is reported that Australia exported a monthly record 31.3 million tonnes of iron ore in September 2008 representing a 38% increase YoY. This has raised exports till date in 2008 to 251 million tonne or 22.7% higher than in January to September 2007.
Meanwhile, FMG exported 8.5 million tonne of iron ore in September 2008. Rio Tinto shipped 46.3 million tonne in the Q3 of 2008, some 2.4 million tonne more than the previous quarter. BHP Billiton exported 32.4 million tonne of iron ore in the Q3 2008.
The coal industry will continue to grow over coming decades in terms of total supply required to meet global demand – that is fairly certain. What will vary is coal prices over the years, depending on the supply/demand equation (not unlike property). Australia, particularly central Queensland, has some of the best and most economic reserves in the world, and is ideally placed to supply the likes of Japan, Korea and India (China supplies most of its coking coal domestically).
What we are seeing at the moment is a boom period. What does that mean for properties? Supply is tight primarily due to the high influx of contractors, as well as an increase in mine employees to cover not only the increased production, but also the construction of the many expansion projects. The question to ask is what will the housing supply/demand look like once the large number of expansion projects are complete, and any production of high cost deposits are ramped down if (when…) the coal price comes down? The comforting point here is that the majority of the transit workers are accommodated in the single persons quarters/camps, not in houses.
The other thing of note regarding mining towns is the trend over the past 10 years to 12 hour shifts and a preference for people to keep their families near the coast – ie Mackay, Sarina etc.. In my view, this means that given the choice, people would be attracted to lower priced accommodation in the mining towns, allowing them to purchase/build larger family homes on the coast.
In summary, I think there will always be demand for more homes in mining towns, however the prices will rise and fall with more volatility than coastal or major centers. Although unlikely, it should be remembered that in the early 2000’s you could buy a 3 bedroom house for under $50k in these towns.
Not sure if this helps people, or just adds more complexity.
Personally, i would not be investing in mining towns at this point in time. That having been said, I remember a friend paying $250k for a house in Blackwater 3 years ago and thought he paid way too much. Just shows what I know…..
Baalsy Bob,
I agree in general with what you say,
I agree that demand for energy will be with us for a long time, but not sure about metallurgical coal demand – that is less certain.
Australia certainly is well positioned globally for met. (coking) coal exports, but it is a small player on a global scale for thermal (power station generation) coal. Coking coal and iron ore are cyclic – about 7 years on average.I would argue that coal prices have ALREADY dropped: – spot prices for both thermal and metallurgical are down:
From http://www.globalcoal.com/news/coalnews.cfm
Newcastle Coal Price Declines for Ninth Week After Oil Slumps
Oct. 20 (Bloomberg) — Power station coal prices at Australia's Newcastle port, a benchmark for Asia, fell for a ninth week, dropping to a 9-month low, amid declining freight rates and as falling oil prices reduced demand for the fuel. The weekly index for power-station coal prices at the New South Wales port fell $7.20, or 6.4 percent, to $104.70 a metric ton in the week ended Oct. 17, according to the globalCOAL NEWC Index. Crude oil dropped 7.5 percent last week and has slumped 24 percent in the past three weeks.The mayhem on the global stock markets have had major impacts on mining companies. The smaller companies are having difficulty raising loans to pay for expansion and even struggling to renew existing finance. Typically, these "smaller" companies are the ones who use contractors to do their mining. So these will be the first to close or postpone expansion plans. If this happens, there will be a large decline in the number of people in the mining towns (although the contractors are typically the ones in the camps, rather than houses).
But even the "big" companies are struggling:
(from http://www.mineweb.com/mineweb/view/mineweb/en/page38?oid=63627&sn=Detail)
The top 5 global mining giants' share prices are all down over 40% since earlier this year. This is masssive.
Stock
From
From
Value
price
high*
low*
USD bn
GBP 13.15
-40.4%
13.4%
139.567
USD 19.15
-56.6%
16.1%
93.835
GBP 37.17
-48.1%
19.5%
95.493
GBP 19.73
-46.4%
17.0%
47.140
GBP 18.87
-57.4%
28.1%
32.621
This means their Debt to Equity ratios have just ballooned. If these prices do not rebound immediately, that means HUGE capital cut backs – they are outside their stated objectives for debt and cannot borrow anymore from the markets. Mark my words.
We'll see what happens.
I support Baalsy Bob's comments "Personally, i would not be investing in mining towns at this point in time."
Hopefulinvestor,
Do you think you might be looking at the waves on the ocean, and not the direction of the tide? The link that you provide http://www.globalcoal.com/news/coalnews.cfm does indeed indicate a drop in particularly thermal coal prices on one article, but several others on the same page talk up the fundamentals of coal – particularly metallurgical. Also:
"The analyst mentions further factors to consider when watching spot coal indices, not least the habit of participants leaving spot markets ahead of contract negotiation season." (http://www.mineweb.com/mineweb/view/mineweb/en/page38?oid=63627&sn=Detail)
My view is long term, and I see a drop in the spot price as a wave on the surface. I think the tide is coming in for coal (metallurgical in particular) on a longer time horizon, based on this reasoning:
1) Developing countries need steel (ergo coking coal) for infrastructure. India and China are both developing in this sense. WIth over a billion people each and increasingly dominant economies. Try stopping them!
2) There is limited supply of coking coal. Sure China mines a lot of its own, but it also imports. Vietnam is about to stop exporting coking coal to China, because it needs it itself since it too is building a lot of infrastructure. That supply will need to be replaced – about 20Mt, which is 2-3 large Aussie mines' worth.
3) The limitations on supply out of QLD (ironically) are infrastructure related. We can't get it out of the ports as fast as customers need it, or even as fast as we can get it out of the ground. This boosts the coking coal price (somewhat artifically), but won't be addressed for at least a couple of years yet – probably more.
4) Even if we weren't infrastructure constrained, the demand is still greater than our mining output i.e. we would then be production-constrained. As long as the constraints are at our end, (the supply end) the price will be held high. This is of course the risk of opening too many mines – we will ultimately become customer-constrained – too much supply. That would be bad, and is possibly what leads to the 'cycle'.
5) The Bowen Basin is largely coking coal, so the arguments and impediments to thermal coal e.g. CO2 etc don't impact as much, if at all. Having said that, even with the emergence of Coal Seam Gas and Natural Gas, I think thermal coal still has life yet. It takes a looong time to come up with an alternative and replace infrastructure that has been established for so long.I think we at the top of a wave, and I'm not buying any more properties in the Bowen Basin right now, but I don't think that a drop in spot prices indicates that the tide is going out. Unless someone comes up with an alternative to steel, India and China will continue to consume coking coal. Directly or indirectly, this is good for the Bowen Basin.
Just my 2 cents worth.
Daedalus.
Daedalus,
I understand what you are saying. I only included those references to provide backup for what I was saying. I am involved in the coking coal mining industry – outside of Australia. The comments were more my own view from within the industry. (I guess that you too might be involved). Also, the articles were before the recent world events but there are always people who talk up commodity prices – that is their job. Just like there are always people who talk up investment property prices – that is their job too.
Have you seen the long-term industry price estimates produced by many independent organisations – they almost all show a severe long-term reduction in price back to historical levels (metallurgical and thermal).
I think it is worthwhile people on this forum who are considering purchasing properties in towns with only one major industry understand the risk that they are taking on in return for fantastic returns – in this case Middlemount, Moranbah, Dysart even Blackwater (to a lesser extent).
As for being "production-constrained" – the current coal prices have stirred mining companies with coal resources all over the world that can compete with Australia at high prices – I believe that Australia will have a primary place within the international coking coal export market for many years to come – but that will be a much smaller market, with less mines and therefore empty houses in the towns….
Personally, I think the tide is on the way out, and it will return – I will wait to see how far the tide goes out.
To all contributors, its great to see so many people interested in the Bowen Basin and see all the positive comments.
BuilderBob,
I would like to clarify an earlier point you made, your 'lazy' comment re: the Elders girls. Just to confirm with you that Elders have been in Moranbah for many years and are opening an office in the next week, they don't need to drive out there like other agents. Elders are only 1 of 3 agents actually based in Moranbah so I defend the lazy comment as I know the business personally.More positively, all comments seem very well informed. Moranbah is an extremely tight market with all the job creation associated with the new mines and expansions. BMA's employment agreement released around 6 months ago started it all with employees/families having greater access to housing rental assistance. Rents are currently starting around $800pw, if you can get a vacant property. Capital prices are rising as companies are buying up to house their staff due to the shortage which wil be around for 12 months before new stock comes on line from the recent land release.
Happy investing, my guess is Moranbah will be good for years to come given the mining company spend pipeline.
HopefulInvestor,
I agree with you that investors in this area need to understand the risks, and I don't mean to paint a 'blue sky' picture by any means. Investors in this area at this point can probably expect some short term gain, but will have a thinner margin of safety to protect them when these towns return to a more normal, operational mode.
Also, I'm not in the industry, so I will always defer to those closer to the game.
My long term view comes out my own analysis and my consideration of fundamental economic drivers. Coal prices returning to historic levels is part of that. In fact, coal prices themselves didn't feature heavily my thinking when I was originally investing in this area. The recent spike and associated activity is a bonus as far as I'm concerned – I got in before all that.
Good to discuss with you,
Daedalus
It's funny how quickly these things move.
I appreciate your comments Daedalus and it's interesting to hear differing views – after all, it's not my view, or even common sense that sets market prices and rents – it's the majority that rules.Anyway, I wasn't going to post anymore comments, but I found these two articles in just the past two days that I thought I would share with you:
Credit crisis to hit mining projects- Credit SuisseBy: ReutersPublished on 27th October 2008 LONDON – The credit crisis risks delaying around $50-billion of the mining sector's capital expenditure used to fund new or expand existing projects in 2009, Credit Suisse said on Monday. Limited access to financing may impact the construction of some 300-million tons of iron-ore, five-million tons of copper, ten-million tons of aluminium and over one-million ounces of platinum, which could be delayed two to three years, a report said. "We think up to $50-billion of the $75-billion scheduled for 2009 is likely to be deferred for at least a year," it said. This could then delay a further $150-billion scheduled between 2010 and 2012, the bank's said. "The potential delay of such capacity is likely to plant the seeds for the next bull market, especially given that the recent five-year bull market did not see large scale capacity additions with the exception of iron-ore," it said. The delayed projects represent around 66% of next year's spending plans, and for iron-ore it would affect some 35% of the current seaborne market.
"The most affected miners are likely to be those with excessive debt like Xstrata and the juniors who have limited access to financing," the report said.
"$50-billion of the $75-billion scheduled for 2009 is likely to be deferred" – wow that's a serious slow-down of capital expenditure – much more than I thought. I know it doesn't mention coal specifically, but iron-ore and metallurgical coal go hand in hand.
The other quote I heard on the Australian ABC AM show:
http://www.abc.net.au/rural/news/content/200810/s2403197.htmIn my opinion, there is increasing evidence that the "mining comapny spend pipeline" is fast becoming a pipedream for 2009.
tammy wrote:The new underground mine going in sparked my interest. It is supposed to be the biggest underground coal mine in the southern hemisphere (or something like that).Hi Tammy
your not talking about the MOURA underground mine are u?I dont think it will take off.Hi Scott,
I think you are refering to Belvedere and assume Tammy was also. They recently just had the leases approved for mining (as opposed to exploration). So it looks like if the demand remains there then the mine will be online in the nearer future than alot of people thought. I was approached to sell my rental last week. It is able to be developed into a unit site and sits next to another for sale. It seems a lack of new units/townhouses (or whatever you wish to call them) has a keen buyer trying to buy up everything. I think I will sit a little longer as it isnt costing me anything to hold at the moment being +ve cashflow.
I am interested though in your thoughts as to why it wont take of?
BuilderBob,
I would like to clarify an earlier point you made, your 'lazy' comment re: the Elders girls. Just to confirm with you that Elders have been in Moranbah for many years and are opening an office in the next week, they don't need to drive out there like other agents. Elders are only 1 of 3 agents actually based in Moranbah so I defend the lazy comment as I know the business personally.MackayInv thanks for your comments , I still disagree from personal experience many times, currently and, dating back for a 15yrs+.
Best of luck with your venture in Moranbah.On another note there has been increased pressure and talk of flying miners in and out daily.
MacAir have began operating flights from Emerald and Moranbah to Townsville and Mackay.
The road west from Mackay has been very congested for a a couple of years with huge amounts of accidents and deaths mostly from miners.
From what I hear on the grape vine , I would not be investing to much in places like Moranbah if what I'm told goes ahead.Hi All, does anyone know what happened to Marian Haulage in Dysart? They are vacating some 30 houses. One is mine and I can't find a tenant. Admittedly the house now needs some work. Can anyone shed some light on this sudden departure? Anyone else replacing them?
Most importantly, can anyone recommend a handyman to paint a house in Dysart and and tidy the place up? Maybe lay some carpet. I also need an electrician – do I need to get someone from Mackay?
The managing agent has been rather slow to respond so I'm trying to get things done for myself.
Many Thanks in advance
Hi Esam
I heard and don't quote me on this (what i heard around town) that they lost a heap of contracts to the mines when the new contracts came up for renewal. the price they were going to charge them was to high and the mines could get it cheaper and did so.
Thanks Rob
Esam,
refer: http://www.dailymercury.com.au/storydisplay.cfm?storyid=3786539
Discussions with my managing agent indicates that there is still demand for good properties in Dysart. If Marian haulage lost the contract unexpectedly at renewal time, then it seems to make some sense that someone else won it, or is about to.
Marian would have been in the ideal position to see if work was tapering off – and they didn't seem to see the contract loss coming. So I'm guessing the haulage work is still there, but someone else is doing it. And they will need to live somewhere too.
So my thinking is that if you get your place fixed up then someone will move in.
There is a maintenance guy in Dysart called Darren Hita 0438 008 782. He is the guy that a few of the managing agents use, I think because he's the only maintenance guy in town. In my experience he's really expensive, but there are no alternatives unless you go up and do it yourself. You might find someone from Mackay, but that will be expensive too because they'll have to travel 200km.
BTW if your PM is slack, sack them and get another. There are a couple of good operators in the area, and for the money they are taking, they should be earning it.
Daedalus
Thanks Rob and, Daedalus for that well researched info of Marian – I'm on to Darren already…sounds like a great bloke.
Cheers
Esamor at least a wealthy bloke
Daedalus.
a wealthy bloke alright…350 bucks to mow the lawn and prune some trees
! At least the house might get tenanted now.I am also settling on a property in Blackwater in a few weeks. I purchased there because the rental return is fantastic – $300K for $550pw.
Does anyone know if its another "Dysart/Moranbah" in the making?
Esam
! At least the house might get tenanted now.You must be logged in to reply to this topic. If you don't have an account, you can register here.
