Australia’s resource and energy exports are estimated at a record $349 billion in 2021–22, up from $310 billion in 2020–21. In 2022–23, exports are forecast to decline by 14% to $299 billion.
The rollout of COVID-19 vaccines in advanced nations is allowing a strong rebound in the services side of the world economy. However, a new surge in cases (of the delta strain) in many nations is inhibiting a full global recovery, including in the automotive sector where semi-conductor chip shortages have forced some renewed plant closures. Container shortages and other supply chain blockages are also impacting adversely on global trade and output, and contributing to upward price pressure.
Australian iron ore earnings are (still) forecast to decline sharply in the outlook period, after topping the $150 billion mark – the first time ever for an Australian commodity – in 2020–21. The global economic recovery and constrained supply saw prices exceed US$200/tonne in the middle of 2021, but the Chinese government’s efforts to limit the country’s 2021 steel output (to 2020 levels) has seen the price decline dramatically in the September quarter. The ongoing recovery in Brazilian supply is set to impact adversely on prices in the outlook period.
Both a stronger outlook for base metals and coal, and the noticeable decline in the Australian dollar over the past three months, have more than offset the impact on export earnings of the modest downward adjustment we have made to our iron ore price forecasts. Lithium exports – of spodumene concentrate and refined chemicals – are expected to almost match zinc exports in 2022–23, as the race to make the world auto fleet electric gathers pace. And exporters of aluminium, nickel, zinc and copper are benefiting from the global move to low emission technologies.
Thermal coal prices have surged in China, as critical shortages emerge. Seaborne thermal coal prices have risen to their highest level in more than a decade. High demand from steel producers and problems with Mongolian supply has also seen Australian metallurgical coal prices reach multi-year highs, more than regaining all of the reduction in export earnings following China’s informal import restrictions.
There are downside risks to these extremely strong export earnings forecasts. They include a potential for a spike 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 effective COVID-19 vaccines to the world’s population, also pose significant risks. Another downside risk is the extent of any further disruptions to Australian resource and energy commodity trade with China.