PERTH (miningweekly.com) – Australia’s resources and energy commodity export earnings are forecast to decline by 4% in 2015/16 to A$166-billion, owing to weaker commodity prices.

Department of Industry, Innovation and Science chief economist Mark Cully said in the December issue of the Resources and Energy Quarterly that weak market conditions were forecast to persist over the short term and that the prospect of any significant recovery in prices for Australia’s resources and energy export commodities in 2016 was limited.

Cully noted that while export volumes were forecast to increase for most key commodity exports, including iron-ore and liquefied natural gas (LNG), weaker commodity prices would continue to weigh on export earnings.

LNG export volumes were expected to increase by 45% to 36-million tonnes following the commissioning of the Queensland Curtis LNG project, and the start of production at the Gladstone LNG project, while iron-ore volumes would increase by 9% to 818-million tonnes, supported by the start of production at the Roy Hill mine, in the Pilbara.

However, a forecast decline in bulk commodity export values was the key driver of the decline in total earnings, underpinned by forecast lower prices for iron-ore, metallurgical coal and thermal coal.

A weakness in Chinese residential construction contributed to a 43% drop in iron-ore and 22% decline in metallurgical coal prices over the course of 2015.

LNG export earnings, however, were forecast to increase by 23% in 2015/16, as shipments from new plants on the east coast started.

“Growing concerns about demand prospects among market participants and a slow supply response led to a marked decline in prices during the December quarter,” Cully said.

Australia’s production of most commodities has continued to increase despite lower prices. The rapid increase in output was expected to underpin the production phase of the boom and provide some support to export earnings.

However, the increase in volumes was unlikely to be sufficient to offset the effect of lower commodity prices across the board.

Meanwhile, the report has pointed out that exploration expenditure declined by 32% in the September quarter, compared with the previous corresponding quarter, reflecting cost-cutting initiatives implemented throughout the year in response to the lower commodity prices.

Mineral exploration at new deposits fell by 11% during the September 2015 quarter, while exploration expenditure at existing deposits fell by 14%.

Cully noted that given the generally lower price forecasts for commodities, a rebound in exploration expenditure was unlikely in the short term.