High-priced coal and LNG sets Australia up for $380 billion windfall

Surging prices for Australian coal and LNG coupled with record exports of iron ore will deliver almost $400 billion worth of resource exports to the nation this year that will translate into stronger economic growth.

Figures to be released today by the Industry, Resources and Energy Department show that over the past three months, expected exports for minerals and energy have been revised upwards by $30.6 billion with the largest risks posed by China’s economy and a possible global lift in interest rates to deal with higher inflation.

Strong LNG exports are tipped to help Australian resource exports reach $380 billion this financial year.

In 2020-21, the resources sector exported a record $310 billion of product, topped by an all-time high $153 billion worth of iron ore. Mineral exports were worth $228.6 billion, and energy exports were worth $81.2 billion.

In its December quarter export report, the department expects total resource exports this year to reach $379.2 billion. In its September report, it had forecast $348.6 billion.

The big change has been in energy with exports from commodities such as thermal coal and LNG now tipped to reach $170.7 billion. Last quarter they had been forecast to reach $128.6 billion.

High prices for both metallurgical and thermal coal are expected to press exports of these to $54 billion and $35 billion respectively. In September, they were tipped to bring in $33 billion and $24 billion.

It’s a similar story for LNG with better prices a key factor in lifting forecast exports to $63 billion. In September, LNG exports had been predicted to reach $56 billion.

Better prices for oil mean exports of crude are tipped to jump by more than 75 per cent to $13 billion in 2021-22.

Copper, aluminum, alumina, lithium and zinc exports have all been revised upwards.

The only major export revised down is iron ore, due to an expected fall in prices, but it will still bring in $118 billion.

The department said there were ongoing positives for the mining sector, with capital spending expected to rise. It reached $1 billion in the September quarter, the fifth consecutive quarterly rise, and 25 per cent higher than its recent low set in June last year.

Strong prices for thermal and metallurgical coal are expected throughout 2021-22.Credit:Bloomberg

“In the coming two years, it is likely that the resources and energy sectors will make a significant contribution to real GDP growth, as producers lift output and exports in response to high prices and margins,” the department found.

The lift is expected to flow into 2022-23. Total resource exports are now forecast to reach $310.6 billion after being tipped to reach $299 billion in the September report.

It did caution that there were risks ahead tied to China which remains Australia’s most important export market. Another risk related to the state of the global economy, with concerns mounting world interest rates will be pushed up to deal with higher inflation.

“Higher global interest rates — in response to persistent inflation — pose a downside risk to global
economic activity and hence the resource and energy export forecasts,” it said.

Resources Minister Keith Pitt said the figures showed the importance of the sector to the national economy as well as the regions.

“These are outstanding results that will provide further jobs and opportunities in our regions and benefit all Australians,” he said.

“Hundreds of new projects in the pipeline, including 60 new or expanded coal mines, will deliver thousands of new jobs, especially in regional areas. The higher forecast earnings are expected to keep the benefits flowing to the broader community, including through royalties the states use to pay for the hospitals, roads and schools, the services we all rely on.”

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