Iron ore is the first Australian commodity to crack $100 billion in annual export value, according to the Australian Government’s latest Resources Energy Quarterly report.
Australian exports for the metal reached $101.7 billion in the 2019-20 financial year, smashing the previous annual export benchmark of $77.5 billion, which was also set by iron ore in the 2018-19 financial year.
The Resources Energy Quarterly specified that while iron ore is normally vulnerable during downturns, like the current global downturn brought about by the COVID-19 pandemic, it has been resilient in recent months.
The demand for Australian iron ore has been driven by China’s infrastructure boom, as well as a weaker Australian dollar, providing the Australian market with a lifeline during tough times.
“The COVID-19 pandemic appears to have affected both sides of the iron ore market,” the Office of the Chief Economist stated in the report.
“Demand disruptions have run up against supply problems localised in Brazil, where COVID-19-related lockdowns have derailed efforts to recover from shutdowns in the wake of the Brumadinho tailings dam collapse.
“Our earlier forecast for Australian iron ore export earnings to top $100 billion in 2019-20 appears to have been achieved.”
The pandemic has affected other commodities too, with gold surging to eight year high prices and set to earn a new record of almost $32 billion in exports in 2020-21.
The uncertain times have not been kind to all commodities though, with sharp price falls for oil, with the average Brent crude price expected to plunge by 40 per cent in 2020.
Base metals have also been “significantly impacted”, due to the sharp fall in vehicle output and sales affecting their outlooks.
While the Office of the Chief Economist has revised its export earnings forecast down, it is “not by an alarming amount”, changing its previous forecast of $299 billion in 2019-20 to $293 billion.
Looking further ahead, the Office of the Chief Economist forecasts exports in 2020-21 to be about $263 billion and $255 billion in 2021-22.
This forecast comes with significant risks however, such as a second outbreak of COVID-19, surges in trade tensions or an unexpectedly slow global recovery.
“To give better context, $293 billion is still the largest resource and energy export figure in Australian history and $263 billion is the third highest,” the Office of the Chief Economist concluded.
“Resource and energy earnings will be almost 50 per cent higher, in real terms, than earned in 2008-09 during the global financial crisis.”