PERTH (miningweekly.com) – Australia’s resources and energy commodity export earnings are forecast to increase to A$176-billion in 2016/17, up 12% from an estimated A$157-billion in 2015/16.

In its latest Resources and Energy Quarterly, the Department of Industry, Innovation and Science shows that spikes in metallurgical coal and iron-ore prices are likely to boost earnings in the year ahead.

The spikes reflect unexpected supply disruptions in Indonesian coal mines and the strength of the Chinese construction sector, chief economist Mark Cully said on Friday.

“Prices for most construction and steel-making raw materials continued to grow in the last three months, despite expectations of decline, because of unexpectedly resilient demand from China’s construction sector and unforeseen supply disruptions.”

Cully noted that the speculative activity in China’s commodity futures markets that led to high spot price volatility in the first half of 2016, had tapered off. This was supported by measures to reduce speculative trading, including increased commission fees, margin requirements and trading restrictions.

“Commodity prices should, therefore, better reflect market fundamentals going forward,” he added.

China’s economy and its demand for construction raw materials was slowing, as it transitions away from investment-led growth to consumption-led growth, Cully added. While any slowdown in the short-term remained sensitive to government policy and stimulus measures, Cully said that the likelihood of significant increases in demand from China for resource commodities was limited.

“Australia’s suppliers are well-placed to satisfy demand for resources and energy over the next fifteen months, despite difficult operating conditions. In particular, production of most bulk commodities is forecast to increase, even as prices decline.”

Export values have also been supported by the Chinese government’s efforts to stimulate its economy. Given the temporary nature of many of these factors, it is likely that price increases will be temporary, with falls in coal and iron-ore prices expected in 2017.

Coal, iron-ore, and liquefied natural gas (LNG) producers are forecast to deliver higher export volumes and earnings.

The strongest growth in export earnings is expected to come from LNG, which is forecast to increase 41%, from A$17-billion in 2015/16 to A$23-billion in 2016/17, supported by additional production at the Gorgon project and new capacity coming on line on the east coast.

Continued growth in the volume of most bulk commodities exports is also expected to contribute to higher export earnings over the outlook period. The value of Australia’s exports of iron-ore is forecast to increase 13%, to A$54-billion in 2016/17.

However, although the price recovery in the first half of 2016 delivered some support to producers, the generally subdued outlook for prices means producers are likely to remain under financial pressure in the near term.

In its quarterly report, the Department of Industry, Innovation and Science noted that global bulk commodities markets were likely to remain well supplied over the outlook period as major investments undertaken over the last decade reached full production capacity.

However, there may be some tightness in global coal supply in the near term owing to production constraints in Indonesia and further declines in the volume of exports from the US

Production volumes for metals commodities are also generally expected to grow over the next 15 months.

Gold production is forecast to increase, supported by further growth in recycled supply, while copper supply is also expected to grow as additional supply from new investments in Peru and Kazakhstan offsets declines elsewhere.

In contrast, world nickel production is forecast to fall over the remainder of 2016 as a result of shutdowns in the Philippines. Nickel production is forecast to increase again in 2017 in line with returning capacity in the Philippines and Indonesia.

Markets for energy commodities are expected to remain well-supplied over the outlook period owing to additional LNG production associated with new projects, and elevated stocks of crude oil and petroleum products.

The Australian Petroleum Production and Exploration Association (Appea) said on Friday that the latest report provided equal measures of optimism and disappointment.

Appea CEO Dr Malcolm Roberts said rising LNG exports were underpinning Australia’s economic growth, but the continuing fall in petroleum exploration was alarming.

“A$200-billion has been invested in new LNG projects, which will soon see Australia become the world’s leading LNG exporter. Thousands of long-term, high wage jobs and more than A$16-billion in export revenue have been generated,” Roberts said.

“However, petroleum exploration is at its lowest level since the March quarter 2006.

“Today’s exploration is tomorrow’s production. Companies prepared to invest heavily in exploration should be allowed to get on with the job under proper regulatory oversight.”

Roberts said that successful oil exploration in the Great Australian Bight, for example, would ease Australia’s reliance on imported oil and deliver South Australia much-needed new investment and jobs.

“Capturing future growth and investment opportunities must remain a priority for all governments to build on a decade of extraordinary resource achievement,” Roberts said.