Iron ore could become the first Australian commodity to surpass $100bn in export earnings this year, according to the Department of Industry, Science, Energy, and Resources, Australia.
The agency’s quarterly report gives a five-year outlook of Australia’s resources and noted iron ore prices reached above $100/mt in 2019 after the Brumhadino dam collapse in Brazil spiked prices before stabilizing them. The report pegs iron ore prices to average $70/mt fob Australia in 2020, before declining to $70/mt fob in 2021, and then to $61/mt fob by 2025.
It expects iron ore export volumes to increase from 874mn mt in 2019-20 to 898mn mt in 2020-21, and to reach 996mn mt by 2024-25 as production begins at new Western Australian mines. The country’s iron ore export values could rise from $79bn ($46.3bn) in 2018-19 to $101bn in 2019-20, before falling back to $72bn by 2024-25 as prices for the ore also decline.
Metallurgical coal prices could decrease from $183/mt in 2019 to around $155/mt in 2020 because of weakening demand for the material. However, the report noted metallurgical coal prices would surge to approximately $167/mt by 2025, with export volumes increasing from 184mn mt in 2018-19 to 205mn mt by 2025. The export value increasing to $38bn in 2025 from $44bn in 2018-19.
Base metals outlook
The report noted aluminum export earnings would decline, while copper and nickel export values were expected to grow. Zinc prices are projected to decline over the next five years as production ramps up amid weakening demand.
Aluminum export prices should average $1,640/mt in 2025, according to the report’s prediction, while smelter and refinery capacities won’t rise over the five years, resulting in flat aluminum production at 1.6mn mt.
Copper prices will increase in the next five years, with the report projecting 2020 prices for the metal to average $5,990/mt before rising by 2pc every year to $6,900/mt in 2025. In terms of volume, copper exports are projected to increase by 929,000mt in 2018-19 to around 1.1mn mt by 2024-25.
Nickel export prices could average $15,300/mt in 2020, followed by another rise to $15,800 by 2025. Export volumes for the metal are also projected to increase from 225,000mt in 2018-19 to 436,000mt in 2025.
Zinc export prices, the report noted, will decrease over the next five years from $2,605/mt in 2019 to $1.864/mt in 2025, with production volumes increasing from 1.2mn mt in 2018-19 to 1.8mn mt by 2024-25.
The mining sector—which comprises 28pc of Australia’s GDP—could feel short-term impact from COVID-19, the report indicated. The pandemic has already driven down base metal prices, though prices for iron ore exported from Australia have remained at the same high levels seen at the beginning of the year. These issues could be resolved by H2 2020 if China’s economy—the largest market for Australia’s resources—returns to normal.
($1=AU$1.72)