Coal, gas poised to ignite export boom

Surging demand for coal and gas has put Australia on track to cash in $379bn in record export earnings.

Updated resources and energy projections reveal massive demand for Australian LNG, thermal and metallurgical coal will exceed last year’s export earnings by $69bn in 2021-22

Surging demand for Australian coal and gas in response to global energy shortages has offset a sharp drop in iron ore trade and put the nation on track to cash in $379bn in record export earnings.

Updated resources and energy projections released on Monday reveal massive demand for Australian LNG, thermal and metallurgical coal will exceed last year’s export earnings by $69bn in 2021-22.

It also shows strong trade prospects for lithium, nickel and copper over the next two years, fuelled by the take-up of new energy technologies, higher prices and increased production.

Metallurgical coal exports are expected to rise from $23bn to more than $50bn this financial year, while thermal coal exports are predicted to jump from $16bn to $35bn in the same period.

LNG export earnings were forecast to increase from $30bn to $63bn in 2021-22.

The slowdown in steel production and construction activity in China will mean iron ore export earnings plunge from a record $153bn to $118bn this financial year, further easing to $85bn in 2022-23.

Keith Pitt. Picture: Gary Ramage

Resources Minister Keith Pitt said Australia’s export earnings were projected to hit new milestones after crashing through the $300bn barrier for the first time last financial year.

Mr Pitt, who is also releasing the government’s resources and energy major projects report showing a $504bn investment pipeline for 367 projects across the country, said “coal is the star performer”.

“Australia is set to benefit from a global shortage of energy, with record earnings from thermal and metallurgical coal and LNG. Australia’s high-quality coal is finding new markets across Asia, including India, with Australian producers enjoying record price increases across all grades of coal,” Mr Pitt said.

“Hundreds of new projects in the pipeline, including 60 new or expanded coal mines, will deliver thousands of new jobs, especially in regional areas.

“The higher forecast earnings are expected to keep the benefits flowing to the broader community, including through royalties the states use to pay for the hospitals, roads and schools, the services we all rely on.”

Reflecting the global shift on climate change and low-emissions technologies, $185bn in planned investment across 367 projects in the development pipeline was focused on hydrogen, ammonia and carbon capture and storage projects.

In the 12 months to October, more than $11bn has been committed to oil and gas projects.

After the Morrison government joined Labor in backing a net zero emissions by 2050 target, Mr Pitt said the growth of new resources markets and renewed interest in gold would deliver “jobs for Australians”.

“Job estimates from proponents of committed projects suggest around 25,100 construction jobs and 8300 ongoing jobs will be created. The majority of these jobs will occur in regional Western Australia and Queensland,” Mr Pitt said.

The resources and energy quarterly report said thermal coal exports had surged to their highest levels in a decade, while metallurgical coal prices reached record highs on the back of high demand from steel producing nations and supply issues in Mongolia. The cold northern hemisphere winter and increased demand for power generation was another major driver of thermal coal exports.

With China “still short of coal” after snubbing Australian suppliers, the government expects Beijing to seek higher imports next year.

“As much of the new supply expected in 2022 is likely to come from Australia, Chinese demand will need to bring in an even greater share of ex-Australian coal than now, resulting in potential for price breakouts and further supply chain disruptions,” the report said.

“Chinese manufacturers have highlighted the deleterious impact that power shortages and rising costs have had on industrial output in recent months.

“Coal shortages have led to power rationing and forced blackouts in more than half of China’s 31 provinces from September this year, severely restricting the country’s industrial activity during the period.

“The Chinese government has given no sign of the end of informal import restrictions on Australian coal, even though Australian coal held for some quarters at Chinese ports now appears to have cleared customs.”

The report raised concerns about weaker demand for steel in China amid weakening output across manufacturing, infrastructure and residential property construction.

“Sharp reductions in Chinese steel production contributed to large price declines in the second half of 2021. The ongoing recovery in Brazilian supply is set to impact adversely on prices during the outlook period.”

“A stronger outlook for base metals and coal have more than offset the impact on export earnings of the downward adjustment we have made to our iron ore price forecasts. Lithium exports — of spodumene concentrate and refined chemicals — are expected to almost match zinc exports in 2022–23, as car makers race to capture the electric vehicle market.

“Exporters of aluminium, nickel, zinc and copper are also benefiting from the global move to low emission technologies.”