Australian resources exports tipped to extend record breaking form

Australia’s resource export earnings are continuing to grow, with surging commodity earnings expected to offset global market volatility in the midterm.

The latest Resources and Energy Quarterly from the office of the Chief Economist projects resource exports will rise to a record $282 billion in 2019-2020, backed by an increase in gold export earnings and depreciation of the Australian dollar.

This is expected to counter the impact of escalating US-China trade tensions, with gold earnings set to surge by one third to $25 billion in the next year as investors flock to the safe haven commodity.

Despite major resource commodities such as iron ore and nickel reaching five-year highs this year, the report anticipates they will likely drift down over the midterm as a result of softer demand and rising supply.

Australia’s iron ore export earnings, for example, are expected to reach $81 billion in 2019-2020, up from $77 billion the year prior, off the back of high iron ore prices.

Earnings are projected to ease, however, to $65 billion in the final year of the outlook (2020-2021) as seaborne prices gradually decline and supply disruptions stemming from Brazil return to normal.

Similarly, zinc prices are expected to fall over the outlook period due to rising production and the value of lithium exports are also expected to drop, as lower prices offset higher export volumes.

The future for copper and nickel remains bright with export earnings for both commodities set to rise.

Growing production is set to coincide with increased consumption of copper leading to prices reaching a forecast $US6620 a tonne in 2021, up from $US6525 a tonne in 2018.

With export volumes set to increase from 934,000 tonnes in 2018-19 to 985,000 tonnes in 2020-21, Australia’s copper export earnings are expected to reach just over $10 billion in the final year of the outlook, up from $9.8 billion in 2018-2019.

Expanding domestic production and a similar price boost is also anticipated for nickel, with the base metal having shown resilience in the September quarter due to healthy consumption growth and concerns around world population.

In 2019, nickel prices are forecast to average $US13,800 a tonne, increasing to $US16,500 a tonne in 2021, leading to a significant boost in Australia’s total nickel export earnings.

Facilitated by expanding production and higher prices, earnings are forecast to increase from $3.6 billion in 2018-2019 to $5.6 billion in 2020-21.

Minister for Resources Matt Canavan said the report highlighted the importance of the mining industry in supporting overall economic growth.

“Our mining industry… directly accounted for a third of the growth in Australia’s GDP in the year to the June quarter 2019, and resource and energy export earnings are expected to reach $282 billion in 2019–20,” he said.

“Those record earnings are underpinned by rising export volumes of iron ore and LNG, and strong prices for iron ore and gold.”

Canavan urged the nations finance sector to support Australia’s new mining projects to encourage innovation in the sector.

“It is also important that Australia’s finance sector continues to support Australian resources and energy projects and invests in greenfield resources and energy projects, including new thermal coal projects,” he said.

“During the boom, resources companies invested hundreds of billions of dollars in new and expanded capacity… as miners replace and expand their fleets, a wave of new innovation is coming through, giving Australia a crucial edge in a massive and highly competitive global market.”

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