Mining export forecasts: $17.4bn slashed
The Industry Department has slashed forecasts for mining and energy exports in 2014-15 and this financial year.
The Industry Department has slashed forecasts for mining and energy exports in 2014-15 and this financial year by a further $17.4 billion as price and production expectations for Australia’s two biggest exports, iron ore and coking coal, continue to slide.
The cuts have been made from forecasts lodged just three months ago and include expectations that Chinese steel production, which as recently as March had been forecast to grow, instead will contract this year and next.
The new forecasts, in last month’s Resources and Energy Quarterly report from the Department of Industry and Science, show how the outlook for Australia’s mining commodities has worsened in the past three months as China continues to slow.
“Global commodity prices are clearly in a downturn and many of the factors that supported the ‘supercycle’ that commenced in the 21st century have now reversed,” the department’s chief economist, Mark Cully, said.
“Strong resources-sector investment has resulted in a surplus of both mining and refining capacity, consumption growth has moderated to lower levels and the US monetary policies that affected US-dollar-dominated prices are starting to shift.”
Over 2014-15 and 2015-16, Australian mining and energy exports are forecast to be worth $351.5bn, down from March forecasts of $368.9bn. In March last year, the forecast export earnings for those years was $453bn.
“In 2014-15, export earnings from resource and energy commodities are estimated to have declined by 11 per cent to $174bn,” the report said.
“This fall in export revenue is partly due to a 27 per cent decline in export earnings from iron ore, a 7 per cent decline in metallurgical (or coking) coal and a 6 per cent decline in thermal coal export values.”
In March, when the year was three-quarters through, the 2014-15 forecast for mining and energy revenue was $179bn. That an extra $5bn was knocked off expectations in the last three months of the financial year illustrates how the situation deteriorated in that time.
A big change in the June report was a reversal of expectations that Chinese production of steel, which requires both iron ore and coking coal, would grow this calendar year and next. “China’s steel production is forecast to contract in 2015 and 2016 as the seaborne supply of iron ore increases,” the report said.
In March, China’s steel production was expected to increase from 823 million tonnes last year to 843 million next year. Now it is expected to fall to 802 million in 2016. Australian resource exports are expected to recover to $177bn this financial year as more export revenue from three big liquefied natural gas plants being built at Gladstone comes in. However, this is still $12bn short of the amount that was being factored in just three months ago.
The biggest forecast changes have come in iron ore, the nation’s biggest export, where $9.9bn has been wiped from export earnings forecasts over the past financial year and in 2015-16.
This has come as price forecasts this year dropped 10 per cent to $US54.4 a tonne and 56 million tonnes of forecast volumes were removed as some miners close operations and curtail or delay expansion plans.