The Metals and Mining sector (including equipment, technology and services) contributed 14.3% of Australia’s GDP in 2024, creating 1.1 million jobs and employing 300,000 people directly.
2024 was a year of contrasts for the Australian metals and mining industry. While some commodities experienced price volatility and market uncertainty leading to projects being scaled back or cancelled, others remained relatively stable or (in the case of gold) showed strong gains leading to new investment and project approvals. Geopolitical tensions, supply chain disruptions and unpredictable global economic conditions will continue to shape the industry's trajectory into 2025 and beyond.
After dropping to a two-year low (below 5,000) in early September 2024, the S&P/ASX 300 Metals and Mining (XMM) index rebounded quickly by the end of the month to just under 6,000 before settling just south of 5,500 at the time of publication.
All eyes are on upcoming elections in Australia and what promises to be an eventful change of government across the Pacific in the United States. New leadership will inevitably come with new policy, so it is only a matter of time before paralysis grips the market as decision makers wait to see what the landscape will look like going forward. In Australia, the current government has limited time to convince the public it has addressed concerns around declining disposable income and rising interest rates, while in the US there are more unknowns than knowns. One thing the sector is becoming familiar with is that the only constant is change. Policy, the outcome of several major global conflicts and the broader geopolitical landscape will determine how the story of the Metals and Mining sector plays out. Unfortunately, nobody has seen the script.
The geopolitical lens
Throughout 2024, geopolitics played an enormous role in shaping the Australian Metals and Mining sector, particularly as it navigated growing tensions between global powers and shifting trade relationships. The rise of geopolitical tensions, especially with China, has led to trade disruptions and changes in supply chain dynamics. Australia’s position as a key supplier of critical minerals for the clean energy transition has increased its importance, but also exposed vulnerabilities, as seen in the fluctuating demand and pricing of these commodities amid global political uncertainty. For instance, China's efforts to secure its own rare earth supply chains have created challenges for Australian exporters, though new trade agreements with other nations, including Japan and the US, are attempting to mitigate this.
Moreover, Australia’s mining sector has been affected by broader regional stability concerns, particularly in the Indo-Pacific. As global power dynamics shift, Australia has strategically aligned itself with Western allies, positioning itself as a stable and reliable partner in the mineral supply chain. However, this alignment has led to tensions with key trading partners, particularly in the Asian region, which has had mixed effects on investment flows.
On the domestic front, political decisions regarding environmental regulations and Indigenous land rights have also been influenced by international pressure, further complicating the regulatory environment for mining companies. In this climate, the Australian mining industry faces the dual challenge of capitalising on geopolitical opportunities while mitigating risks related to political instability and shifting global alliances.
In 2025, geopolitical tensions are likely to continue. Australia, as one of the world’s largest suppliers of critical minerals, will remain central to international competition, but trade relationships, especially with China – the largest consumer of Australian minerals – are likely to remain volatile, with ongoing shifts in China's supply chain strategies potentially causing supply disruptions. Australia’s strengthened ties with the US and Japan may lead to new trade agreements, but also to risks of being caught in the crossfire of broader global rivalries.
Internally, Australia’s mining sector will continue to face regulatory and environmental pressures. Increasing calls for more sustainable and ethical mining practices will be influenced by global narratives around environmental responsibility, especially in Europe and North America (depending on the approach taken by the incoming government). These external pressures could impact investment decisions, particularly regarding projects on Indigenous lands or in ecologically sensitive regions. As the geopolitical landscape continues to evolve, Australian mining companies will need to be agile, balancing national interests, regulatory requirements and the evolving demand for commodities on the global stage.
The Australian lens
Australia's mining industry remained a global powerhouse in 2024. The Commonwealth Government's Future Made in Australia plan, aimed at boosting domestic manufacturing and value-adding, has the potential to create new opportunities for the sector. However, challenges such as labour shortages and rising input costs persist, making it more difficult to do business in Australia than some other countries with significant proven reserves.
Governments at both Commonwealth and state level have committed to supporting the development of resources essential for the global energy transition and to decarbonise existing mining operations, adopting a range of direct and indirect support mechanisms. These policies are likely to continue, with potential expansions in funding for new projects and technologies that focus on minimising environmental impacts. However, this commitment will come alongside stricter environmental regulations aimed at ensuring mining activities adhere to sustainability standards. The government's push for net-zero emissions by 2050 could result in stricter carbon emissions targets for the mining industry, especially for the largest producers of greenhouse gases.
At the same time, Australian mining companies will have to navigate an increasingly complex regulatory environment in relation to indigenous land rights and the broader social license to operate. Recent policy shifts have focused on ensuring Indigenous communities have greater involvement in decision-making processes regarding resource extraction. In 2025, we may see further moves toward strengthening this framework, with new legal and social obligations for mining companies, such as the requirement for community consultation and equitable benefit-sharing agreements. These changes could increase operational costs but also open the door for new partnerships and a more sustainable, long-term development model.
Commodity outlook
Iron ore
Iron ore's performance is likely to remain robust, but with evolving challenges. Australian iron ore producers are expected to continue benefiting from strong demand for high-quality ore, particularly from Asian markets, despite economic slowdowns. The shift toward cleaner steelmaking, including the use of hydrogen and carbon capture technologies, may begin to alter the demand for certain types of iron ore with green steel being a popular conversation piece during 2024. Australia’s investments in improving production efficiency and sustainability will be put to the test against the Simandou project which is due to start producing in 2025. Additionally, as global supply chains remain sensitive to geopolitical tensions, Australian iron ore exporters could see fluctuating demand, especially from regions like Europe and Southeast Asia, as they navigate trade agreements and political dynamics. The global emphasis on decarbonisation may also lead to increased scrutiny on mining practices, which could impact the regulatory environment for Australian iron ore producers. Overall, while market volatility is likely, Australia’s iron ore industry is poised to maintain its critical role in global supply chains in 2025.
Gold
Gold is expected to continue its solid performance, though it may experience some price volatility depending on broader economic and geopolitical developments. Australian gold producers are likely to benefit from sustained investor interest in gold as a hedge against inflation and economic instability, particularly if interest rates remain high globally. Moreover, the shift towards sustainable and ethical mining practices will likely remain a key factor for Australian companies, as investors increasingly demand their portfolios align with environmental, social and governance (ESG) criteria. With Australia's gold mining companies focused on improving efficiency and reducing environmental footprints, the sector is well-positioned to maintain a competitive edge. However, potential interest rate hikes and any stabilisation of inflation may cause periodic declines in gold prices, which could affect profitability in the short term. Overall, while gold may face some volatility, Australian gold miners are expected to remain resilient, benefiting from both global demand for the metal and their strong operational foundations. We also expect positive industry tailwinds to drive continued consolidation in the sector, with capital raisings and M&A underpinning a strong pipeline of deal flow.
Copper
Copper is expected to remain a critical commodity in the global transition to a low-carbon economy, with demand largely driven by the continued growth of the EV market and renewable energy projects. However, the copper market may face challenges, including potential oversupply as several new projects, particularly in Latin America, come online. This could exert downward pressure on prices. Additionally, global economic uncertainty, including the potential for slower growth in key markets, may dampen copper consumption. Australian companies, while well-positioned with strong operational capabilities, will need to navigate rising costs and increasing competition from other producers. The push for sustainability and responsible mining practices may also create additional regulatory and operational hurdles. Overall, while the medium-term outlook for copper remains positive, especially given its central role in green technologies, price volatility and supply chain issues could lead to a more challenging environment for Australian producers in 2025.
Nickel
Indonesia’s announcement of plans to manage the production of nickel ore with a view to balancing supply and supporting smaller operators may bring hope to the struggling producers. However, prices on the LME have struggled to recover and still sit close to three-year lows. Domestically, we have continued to see nickel-focused explorers and developers pivot towards more in-demand metals, in particular gold. The push for decarbonisation and the transition to renewable energy are expected to drive the demand for electric vehicles, which will, in turn, increase demand for nickel. However, the market is likely to experience price volatility as global supply issues persist. Environmental concerns and regulatory pressures may drive further innovation in nickel extraction techniques, making Australian companies' commitment to sustainable mining practices increasingly important.
Coal
The outlook for coal remains somewhat mixed. On one hand, strong demand from Asia, particularly from countries like India and China, is expected to continue driving exports. These countries have significant ongoing needs for coal, especially for steel production and electricity generation, which will support stable demand. However, the global energy transition continues to gather pace, with more nations pushing for stricter emissions reductions and a shift toward renewable energy. This may lead to declining demand in Europe and parts of North America as countries implement green energy policies and reduce reliance on fossil fuels. Australian coal producers may face increasing regulatory pressure both domestically and from key international trading partners who are focused on ESG concerns. Additionally, fluctuating coal prices will remain a concern, driven by global supply chains, geopolitical factors, and competition from other energy sources. Overall, while demand from key Asian markets will likely keep the sector stable in the medium term, Australian coal companies will need to adapt to shifting global energy trends and evolving market conditions.
Lithium
The outlook for lithium in 2025 is more cautious than initially anticipated due to price corrections driven by oversupply and slowing demand. While global lithium production is set to increase, particularly from regions like Chile, Argentina and the US, the rapid rise in supply is outpacing demand growth, leading to price pressures. The EV market could also face slowdowns due to economic factors like rising interest rates and inflation, which may reduce consumer purchasing power. Additionally, advancements in alternative battery technologies could lessen reliance on lithium. As environmental and ESG standards become stricter, Australian miners may also face higher operational costs. Overall, while demand for lithium remains strong, these factors suggest further pain for the market in 2025.
Trends to watch
Equity and debt financing: Equity and debt financing markets remained relatively active in 2024, with a focus on sustainable and ESG-focused projects. However, rising interest rates and economic uncertainty could impact funding availability in 2025. Senior bank debt is likely to be harder to come by, driven largely by ESG constraints, and it is possible that private credit will emerge (alongside government programmes) as a key pillar of industry support.
M&A: M&A activity in the metals and mining sector was moderate in 2024, driven by consolidation and strategic acquisitions, but accelerated towards the end of the year, culminating in the $5bn scheme proposal by Northern Star for gold developer De Grey. While M&A activity is expected to continue in 2025, the pace may be influenced by economic conditions and commodity price volatility.
Project development: Project development activity was mixed in 2024, with some projects facing delays due to financing challenges and regulatory hurdles. However, a strong pipeline of projects remains and increased investment in critical minerals could drive new project development in 2025. Energy projects, in particular renewables to target decarbonisation efforts around mine sites has also seen significant growth in recent years.
Other trends: Issues such as labour shortages, supply chain disruptions and ESG considerations continued to impact the mining industry in 2024. In 2025, the industry will need to address these challenges while navigating a complex geopolitical and economic landscape.
Closing comments
The Australian metals and mining industry faces a complex and uncertain future in 2025. While domestic opportunities abound, global economic conditions, geopolitical risks and commodity price volatility will continue to have an outsized influence on government policy and the overall investment climate.