Australia’s iron ore price leads to $300b export boom

Despite Australia’s trade battles with China, exports have given the economy a huge cash injection with iron ore reaching a huge milestone.

Iron ore is set to make a record breaking $149 billion from exports this financial year as its price continues to surge.

The popular export’s prices smashed through the $US200 ($A263) a tonne mark and reached a high of $US237 ($A312) a tonne on May 12. This marks a jump of 50 per cent since the start of the year, amid huge demand from China while Australia’s biggest competitor, Brazil struggled to export due to disruptions caused by Covid.

A raw material used for steelmaking, iron ore topped $100 billion last financial year, but with the boom in price it is expected to push the total up by nearly 50 per cent for 2020-21 compared to the previous year, revealed a government report.

Iron ore’s story is part of bumper year with a whopping $310 billion raked in from Australian exports from mining and energy, including coal and copper, according to estimates from the Department of Industry, Science, Energy and Resources. This beats a $296 billion forecast made in March, a rise of 5 per cent.

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Iron ore has contributed half of the money to the billions raked in from Aussie exports this financial year. Picture: Supplied

Australia’s booming exports are expected to continue into the 2021-22 financial year, with predictions it will top $334 billion, although iron ore is expected to dip with its earnings to top $113 billion.

Resources Minister Keith Pitt said Australia’s resources sector was important to the national economy through the Covid-19 downturn.

“The sector is poised to take advantage of the global post-Covid recovery and capture opportunities from strong demand and higher prices across a range of commodities,” he said.

“Our iron ore producers are benefiting from current high prices and decades of investment and innovation, while coal exporters have pivoted to new markets to regain much of the losses from the Covid downturn and China’s informal import restrictions.”

But as Brazil recovers from a lack of workers due to Covid and concerns about dam safety, prices for iron ore are estimated to sit at $US150 ($A197) a tonne on average in 2021, before falling below $US100 ($A131) a tonne by the end of 2022.

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NT Bullion, the owners of the rebirthed Frances Creek Mine near Pine Creek, will load and export its first 30,000 tonnes of hi-tech lump iron ore. Picture: Che Chorley

China consumed 45 per cent of the Australia’s resources and energy exports in 2020.

Despite Chain’s ban on Australian coal, another major export, which was introduced in January, the government does not expect the value of its exports to take a financial hit, as producers looked to new markets like the northern hemisphere, which experienced a freezing winter.

“The current informal restrictions imposed on Australian exports to China also represent a significant variable, though no change to this policy is assumed over the outlook period,” the report noted.

Other popular exports hit price milestones, with thermal coal from Newcastle is at a 13-year high above $US131 ($A172) a tonne, while copper has also shot up to $US10,000 ($A13,177) a tonne.

But government forecasters warned delays in the rollout of the vaccines across the world, plus a global spike in inflation could impact on the huge sums of money expected to roll in on the back of exports.