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PERTH (miningweekly.com) – Australia has lowered its expectations for resources and energy export earnings for 2015/16, as challenging market conditions persisted.
In its latest Resources and Energy quarterly, published on Friday, the Office of the Chief Economist estimated that export earnings in 2015/16 would decline by 7% to A$160-billion, compared with a previous forecast of a 4% decrease to A$166-billion.
Chief economist Mark Cully noted that over 2015, prices across a broad range of commodities declined sharply, continuing the reversal of the price gains posted during the commodities boom.
“Although commodity prices have mounted a partial recovery in early 2016, gains are not expected to be sustained with underlying market fundamentals remaining largely unchanged,” he said.
“Australian producers have in the past demonstrated their ability to respond to changing market dynamics. They will need to continue doing so to ensure they remain competitive in what is expected to be an often volatile market over the outlook period,” Cully said.
Prospects for Australia’s resources and energy sector were better over the medium term, although the outlook differed across the commodities, the report found.
Iron-ore was set to remain the highest export earner while the liquefied natural gas (LNG) sector was projected to record the strongest growth in earnings, driven by a tripling in volumes between 2014/15 and 2020/21.
The prospects for growth in earnings from base metals also appeared promising, although greater investment in new capacity would be required to capitalise on future opportunities, Cully said.
The outlook for thermal and metallurgical coal remained more subdued, with earnings from both commodities projected to fall because of lower prices and relatively stable volumes.
“Australia’s resources and energy commodity export earnings are projected to increase by 3% a year to reach A$208-billion in real terms in 2020/21,” Cully added.
LNG export earnings were expected to increase by about 250% in the same timeframe, to A$42-billion, while iron-ore export earnings were expected to increase by 29% to A$72-billion. At a staggering 926-million tonnes in 2021, this would account for 58% of global iron-ore trade.
Resources and Energy Minister Josh Frydenberg said on Friday that, despite the current challenges, mining sector employment was still more than twice the size of the figures recorded before the mining boom, with the industry accounting for 10% of Australia’s economy and employing more than 300 000 people.
“In the face of softer commodity prices, a lot of hard work has been undertaken to increase the competitiveness of Australia’s energy and resources sectors and this should be acknowledged. Innovation plays an important role here with research and development expenditure by resources and energy companies accounting for around 15% of all such expenditure in Australia,” Frydenberg said.
“As a result, we are seeing autonomous drills, trucks, and underwater vehicles being deployed on many Australian sites. Importantly, labour productivity increased by 33% for the sector over the last two financial years.”
The Minister added that boosting productivity had helped to ensure that Australia maintained its competitive edge through this challenging period.
“With commodity demand set to increase in the medium to long term, the outlook for these great Australian sectors continues to look bright.”