Australia's export fortunes will remain tied to the selling of resources (rather than innovative products), and coal could be king again (for a year anyway).
These are key messages of the Australian Government's June 2018 Resources and Energy Quarterly report, according to a statement by Resources Minister Matt Canavan.
“It is likely coal and iron ore will continue to fight it out for the title of Australia’s top export-earner in coming years, while LNG [liquid natural gas] will also perform strongly", Minister Canavan said. “These are very exciting figures.”
According to the report, the value of coal exports is set to rise to $58.1 billion in 2018-19, with $57.7 billion forecast for iron ore. And in the wake of the upturn in earnings, there may also be a modest increase in coal exploration in Australia, a sign that the recent slump in exploration investment may have bottomed out.
But the report also finds that for thermal coal the record of $23 billion in 2017-18 was "coming largely from transitory factors' and will reduce to $19 billion in 2019-20, while for metallurgical coal there will be decline from a record high of $38 billion down to $32 billion over the same period.
Earnings from iron ore are also to fall, from $62 billion in 2017-18 down to $55 billion in 2019-20.
By contrast, the report points to LNG as key to Australia's longer term commodity success. There are three major LNG projects expected to be completed in 2018 - the Wheatstone, Ichthys and Prelude - and gas exports are set to rise strongly to meet the "massive new demand" from Asia. It means that the value of Australia’s LNG exports is likely to increase from $30.8 billion in 2017–18 to $42.4 billion in 2019–20, and will overtake metallurgical coal as Australia’s second highest resource export by value in 2018–19.
For 2018-19, the report predicts total export earnings from commodities to increase by $12 billion to $238 billion, mainly driven by an increase in export volumes, and then to fall slightly to $232 billion in the following year.
The overall positive outlook for Australian commodities is underpinned by a surge in infrastructure and energy demand in some Asian countries, including India and Indonesia. It has kept commoditiy prices relatively stable, also as a fall in China's demand was less sharp than expected.