PERTH (miningweekly.com) – The fall in commodity prices has had the unavoidable effect of dragging down investment in the Australian resources sector, advisory firm Deloitte reported on Wednesday.

In its most recent Investment Monitor, Deloitte noted that the collapse of key commodity prices would challenge the uptake of new projects, with several potential resource projects considered to be too far up the cost curve, giving rise to a number of project cancellations and delays in the near term.

Furthermore, fewer projects would be approved and those that did get the green light, would be of smaller scale than previously seen.

The advisory firm noted that the iron-ore market would be swamped with new supply, with a number of new suppliers coming on-stream in Australia, including the $10-billion Roy Hill iron-ore project, being developed by Hancock Prospecting, along with a further $4-billion worth of projects to be completed over the next year.

However, Deloitte said the current iron-ore price tumble could result in a number of delays for iron-ore projects in the country.

On the coal front, the value of work on Australian projects in the quarter ended December 31 was down nearly one-third on the prior comparative quarter. Deloitte noted that, without a marked improvement in the coal price, a number of planned coal projects would likely be delayed or scrapped.

The base metals market was experiencing the same fate, with the firm pointing out that it was unlikely that much of the investment potential in the sector would be realised in the short term.

Planned investment across all sectors of the Australian economy fell to its lowest level in seven years in the quarter ended December 31, Deloitte reported.

It noted that the overall value of projects in its database fell by $81.1-billion during the December quarter, to $833.3-billion, down some 8.9% from the previous quarter and down 3.8% on the level recorded a year earlier.

The value of projects classified as ‘definite’, meaning either under construction or already committed, decreased by more than $20-billion quarter-on-quarter, while the value of projects classified as ‘planned’, meaning those under construction or possible, decreased by $59.5-billion.