Kalgoorlie As 2017 rapidly draws to a close I think it’s timely to look back over the year to see how it panned out compared with what we expected, and postulate on what we think may lie ahead in 2018.
We set out at the start of 2018 to position ourselves for an expected upturn in the market and to a large extent this program has been successfully completed, notwithstanding a number of our team deciding to add to the World’s population and taking parental leave! The improved market conditions has also started to filter through slowly on the back of improving confidence in the commodities market. During the year Gold has risen about 10% in US dollars, nickel 15% and copper 25%. Nickel has been on the rise from a low of US$3.40 lb two years ago to US$5.45 lb today. It has been up as high as US$5.80 lb so continues to be erratic but with an overall upward trend. Stock piles on the LME have maintained a downward trend, the stockpile peaked at 470k tons in June 2015 and is now at 375k tons so close to 100k tons lower. Again the movement is not consistent but the overall trend is down.
It seems the reason for these trends is decreasing supply, some of which is for environmental reasons and some for economic factors being mainly the low price. The interesting one continues to be the use of nickel in batteries for EV and house PV system back up as these are growth markets. My authoritative contacts in this area tell me that stainless steel manufacture is by far the largest user of nickel, followed by electro plating with use in batteries a long way behind but growing. The impression I get is that battery consumption of nickel will never get close to the traditional user volumes but often a small percentage change can swing the pendulum from over to under supply with the price responding accordingly. Nickel West’s move to build a nickel sulphate plant to produce a high grade battery quality product has also opened up the electro plating market which is a positive for this area.
Another development worth watching is that of the various battery technologies. The University of Sydney has made a breakthrough with recharging Zinc Air batteries, the link to the report on their website is: https://sydney.edu.au/news-opinion/news/2017/08/15/university-of-sydney-charges-ahead-on-zinc-air-batteries.html
Battery technology is evolving rapidly and reminds me of the early days of desk top computers and the proliferation of operating systems, none of which would talk to each other!! Then along came Windows and from then on we had a standardised system which has dominated the computer world ever since. I think the same thing will happen with batteries but it may be a year of two before we see which technology will prevail. For us in the Goldfields we win whichever technology is adopted as we produce all the minerals necessary to manufacture the various batteries, and the common element to all of them is nickel!
On the property front the year has seen a steady trend of lower residential vacancy rates. We started the year at just over 8% and at the end of last week it was down to 4.09% so effectively half. Interestingly we normally expect an increase in vacancy in December as people move out at the end of the school year and their replacements do not arrive until January, but this year is different! We expect to see a continued tightening of the market in 2018, and once down to around 3% some pressure on rents. Our average rent dropped $120 a week two years ago which is about 25% so we have all been doing it tough ever since, except our tenants of course!! Another indicator of the turn round is traffic through the Kalgoorlie airport which has increased, and hotel occupancy rates have also gone up.
Residential sales volume is showing signs of improving but with a long way to go. Interestingly sales values have held remarkably steady. I gave a presentation to the Kalgoorlie-Boulder Chamber of Commerce and Industry ‘What’s Down The Track’ Forum in November in which I included some graphs compiled by RP Data – Core Logic as part of a series on the effect of the mining downturn on property turnover and value. The report selected seven regional centres with mining as the dominant industry, three in WA and four from South Australia, NSW and Queensland so a broad cross section of areas and commodities. Port Hedland is typical of six out of the seven towns with values falling in line with turnover. The exception is Kalgoorlie-Boulder which had a severe turnover drop but the value of property remained remarkably steady. This is in line with a REIWA report on value movements covering 15 years, 10 years, 5 years and 1 year, which also included all the coastal towns and cities from Esperance to Geraldton including Perth – interestingly the Kalgoorlie-Boulder market was the most stable and consistent of all of them, clearly demonstrating that our City has a very broad economic base and is a sound place in which to invest.
On the subject of investing, the City of Kalgoorlie-Boulder has released an excellent publication showcasing the City called ‘Kalgoorlie Boulder Investment Prospectus 2017’ – a copy is available here http://www.ckb.wa.gov.au/CKB/media/Documents/Economy%20and%20Growth/Documents/2017-KB-Investment-Prospectus.pdf . It should make a great staff recruitment tool!
Another initiative of the City is the Growing Kalgoorlie Growth Plan. Seven areas were identified as necessary contributors to the growth and development of the City. I am involved with one, ‘Develop the Built Environment and Sense of Place’ which has been broken down into a number of subsections. The one that I am focussed on is Hannan St and the CBD and how it can be developed to make it an enticing and interesting place to visit, linger and trade. The City have made a consultant appointment and will announce the one selected to lead the consultative process and develop a plan and strategy before year’s end. I understand the applicants for the role were all leading firms throughout Australia so a high quality field from which to select. Our group will have input into this process and I expect an exciting plan to result. The project has some $8 million in the bank to fund the planning work so it is seriously underway.
Overall I think the City is in the best shape it has been in for many years, all the pieces of the jigsaw are now on the table and just need to be finally compiled.
That leaves me to wish you a fantastic holiday season and a healthy and successful 2018!
Chris Fyson
