Australia’s resource and energy exports are estimated to reach a record $379 billion in 2021–22, up from $310 billion in 2020–21. In 2022–23, export earnings are then forecast to decline back to $311 billion, as commodity prices settle lower.
The global recovery remains underway, sustained by the ongoing rollout of COVID-19 vaccines and continued fiscal and monetary support across major economies. However, new outbreaks (and variants) of the pandemic across many regions are inhibiting a full global recovery, as are supply chain blockages — including shortages of semi-conductor chips and of shipping containers in some locations.
China’s power shortages have been a dominant influence on global resource and energy commodity prices in recent months. As a major global metal refiner, the power shortages have seen Chinese (base and ferrous) metal output cut back. China’s property sector has slowed noticeably since our last report, cutting metal usage. However, the Chinese authorities now appear to be taking steps to stabilise the sector.
New policy developments are also impacting the global resources and energy sector. In October, China’s government instructed the nation’s coal miners to lift output and imposed a thermal coal price cap, following critical shortages. In November, the US Congress passed a US$1.2 trillion infrastructure program, which will have a stimulatory effect on economic growth domestically and have flow-on effects offshore.
A stronger outlook for base metals and coal is expected to more than offset the impact on export earnings of the downward adjustment we have made to our iron ore price forecasts. Lithium exports are expected to overtake zinc exports in 2022–23 as car makers race to capture the electric vehicle market.
With energy inventories lower than normal, the severity of the remainder of the Northern Hemisphere winter will have a critical influence on energy markets in the short term. The La Niña weather pattern will likely impact on the demand and supply for coal and other energy products.
The risks to the record export earnings forecast for 2021–22 are skewed to the downside. They include a much faster than expected decline in coal prices. There is also potential for a further rise in global inflation and a risk of higher interest rates in response. New, vaccine-resistant strains of the coronavirus, and the risk of delays in the rollout of COVID-19 vaccines to the world’s population, could also pose significant risks.