Every March edition of the Resources and Energy Quarterly provides a five year outlook for Australia’s resource and energy exports (extending beyond the two year focus in other reports). This allows us to consider additional structural factors beyond near-term cyclical and one-off issues.
Australia's resource and energy exports are forecast to hit a record $296 billion in 2020–21, a strong result, in the context of the COVID-19 pandemic. The improved outlook reflects the ongoing rollout of vaccines, and the momentum this is providing for economic activity and trade amongst many of Australia’s major trading partners.
Ongoing success in managing COVID-19 and reduced supply disruptions are expected to restore global demand for resources and energy commodities over the five years. As prices moderate, Australia’s resource and energy exports are forecast to ease slightly to $288 billion in 2021–22, and remain stable over the outlook period to 2025–26.
The value of Australia’s iron ore exports is expected to reach a new all-time high of $136 billion in 2020–21. Strong demand for iron ore and disrupted supply from Brazil, saw a surge in prices in late 2020, coupled with sustained growth in Australia’s export volumes.
Coal markets have been adjusting to trade disruptions with China, with Australia’s exports being redirected to other importing nations (such as India, Japan, and South Korea). However, Australia’s coal exporters continue to receive lower premiums for their coal. If this is sustained, it could raise broader questions around production levels at some of our higher-cost mines.
Another structural change expected to gain momentum over the five-year outlook period is global energy uptake of new and low emissions technologies. Australia’s exports of commodities central to these technologies — lithium, nickel and copper — are set to surge. Revenue from these three commodities is expected to exceed current thermal coal revenue (in real terms) by 2025–26.
In spite of an improving outlook for resource and energy exports, downside risks remain. This includes any substantial delays in the successful rollout of effective COVID-19 vaccines, as well as further disruptions to Australia’s resource and energy commodity trade with China.