Australia’s resource and energy export earnings are forecast to reach a record $211 billion in 2017–18.
It comes after Department of Industry, Innovation and Science’s chief economist Mark Cully elevated his prediction for resources exports for the financial period by two per cent, surging the expected value of Australian exports to reach $211 billion.
The Resources and Energy Quarterly – September Quarter 2017, released on Friday by the Department, shows a 27 per cent increase in earnings in 2016–17 to $204 billion. In the following financial year the figures are tipped to reach the record mark before declining to $201 billion in 2018–19.
The increases in 2016-17 and those predicted for 2017-18 are largely driven by price increases in iron ore and metallurgical coal – Australia’s top two resources and energy commodity exports.
Capacity cuts in coal, a resurgence of China’s steel sector, as well as temporary supply disruptions, were all attributed to boosting the price of metallurgical coal and iron ore in 2016–17.
“Buoyant prices for steel-making commodities and thermal coal, and increased LNG export volumes, are expected to increase Australia’s resource and energy export earnings to a record $211 billion in 2017–18,” Mr Cully said.
The price spikes aren’t tipped to last, however, with a drop predicted beyond the 2017-18 financial year.
Mr Cully cited the combination of slowing demand growth from China’s steel sector and increased global supplies as factors to predicted lower export unit values in 2018–19.
Despite the forecast decline in export earnings, LNG export growth is expected to constrain the decline in export values in 2018–19.
“In the next two years, LNG export earnings are forecast to increase at an annual average rate of 26 per cent, to reach $35 billion in 2018–19, becoming Australia’s second largest resources and energy commodity in terms of export earnings,” Mr Cully said.
The report also forecast the 36.9 million tonnes of LNG exported by Australia in 2016 would double to 73.8 million tonnes by 2019.
The value of LNG leaving Australian shores was worth $22.3 billion in 2016-17, and is forecast to increase to $30.3 billion in 2017-18 and $35.4 billion in 2018-19.
Australia’s four other most profitable commodity exports are estimated to decline over the same period, with iron ore export values predicted to drop by 14 per cent, coking coal by 23 per cent, thermal coal by 12 per cent and gold by 6.5 per cent.
LNG is tipped to usurp coking coal as Australia’s second most productive commodity export in 2018-19.
The report also features a special report on the prospects for India’s resource commodity consumption out to 2035.
“The prospects for Indian resource and energy commodity usage over the next 20 years are promising, though it won’t be on the same scale that we have seen from China over the past decade or so,” Mr Cully said.
Mr Cully said growth in export volumes of key commodities, excluding LNG, could be temporary.
“Recent trends in exploration and capital expenditure in the Australian mining sector do not point to an extension of the resource production boom, currently forecast to peak late in 2019,” he said.
