Australia’s resource and energy exports are estimated at a record $310 billion in 2020–21, with almost half of those earnings coming from iron ore alone. This is a very strong result in the context of the global COVID-19 pandemic. In 2021–22, a further significant rise in exports to $334 billion is forecast, before moderating world economic growth and falling prices reduce exports to just below $304 billion in 2022–23.
The rollout of COVID-19 vaccines in the major nations/regions is now steadily allowing a rebound in the services side of the world economy, where many sectors (such as land and air-based tourism and hospitality) were more heavily impacted than goods markets. Gasoline and jet fuel — and hence oil — demand is picking up accordingly. The pent up demand for goods, and strong dwelling and infrastructure spending in many countries, is set to see strong demand for steel and non-ferrous metals for some quarters yet.
Australian iron ore earnings appear to have surged by almost 50% to an all-time high in 2020–21: after topping the $100 billion mark (for the first time ever for any commodity) in 2019–20, iron ore export earnings are forecast to rise to $149 billion in 2020–21. Base metal prices have all surged back above levels reached just before the COVID-19 pandemic; strong demand and worries over higher taxes on South American miners have raised fears of a fall in mining investment in the continent, boosting the copper price to over US$10,000 a tonne.
Coal markets continue to adjust to China’s informal import restrictions on Australian coal. Thermal coal prices have surged in China, as a critical shortage emerges ahead of the Northern Hemisphere summer — when cooling demand raises the need for increased power output. Surging demand from steel producers has seen Australian metallurgical coal prices regain all of the losses incurred as a result of China’s informal import restrictions.
Downside risks to the export earnings forecasts include a spike in global inflation and a sharper than expected tightening of monetary policy, and substantial delays in the successful rollout and take-up of effective COVID-19 vaccines to a large number of the world’s working population. Another downside risk is the extent of further disruption to Australian resource and energy commodity trade with China, which took 45% of such Australian exports in 2020.