Australia’s iron ore export revenues forecast to rise in 2019-20 amid high prices

Wednesday, 03 July 2019 15:38:05 (GMT+3)   |   Istanbul
       

Australia’s resources and energy export earnings are expected to reach A$285 billion for the financial year 2019-20, surpassing the record earnings of A$275 billion in the previous financial year, based on preliminary estimates, according to a report by the Australian government's Department of Industry and Science. The report suggested the strong figures are primarily the result of high iron ore prices. A tailings dam collapse at one of Vale’s iron ore mines, and subsequent associated mine closures, have led to a sharp and sustained drop in Brazil’s iron ore exports, which has tightened up the seaborne iron ore market and driven prices up. Ongoing weakness in the Australian dollar is also expected to boost export earnings.

However, “Like any forecast, this one carries risks of a shortfall - notably if trade tensions between the US and its major trading partners, particularly China, increase. Disruptions to trade could hit global manufacturers particularly hard, and the impacts will inevitably flow on to the commodity producers who provide them with raw materials,” stated Mark Cully, chief economist at the Department of Industry and Science.

The value of Australia’s iron ore exports is forecast to increase from an estimated A$75 billion in 2018-19 to A$79 billion in 2019-20, before declining to A$65 billion in 2020-21. The decline will be driven by falling prices, as the seaborne market returns to a more balanced position from the second half of 2020 onwards, the report pointed out. Australia’s iron ore export volumes are forecast to increase from 806 million mt in 2018-19, to 869 million mt in 2020-21, due to development of three of the world’s largest iron ore projects, namely, Fortescue’s Eliwana, Rio Tinto’s Koodaideri and BHP’s South Flank. Meanwhile, the iron ore price is forecast to increase to US$80/mt FOB Australia in 2019, as a result of supply disruptions, primarily in Brazil, and robust demand from China.

According to the June quarterly report, Australia’s coking coal export volumes are forecast to grow from 180 million mt in 2018-19 to 198 million mt in 2020-21, reflecting both an expected recovery from supply disruptions and production growth from restarts and new operations in the Bowen Basin. Export earnings are estimated to reach a new record of A$42 billion in 2018-19 and are forecast to fall to A$36 billion in 2020-21, due to an expected decline in prices. The premium hard coking coal spot price is forecast to decline from an average of US$207/mt in 2018 to US$198/mt in 2019 and to $170/mt in 2020.


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