Commodity forecasts and future export prospects
Tim Bradley
General Manager
Economics Advice Service, Office of the Chief Economist
October 2016
1
REQ September 2016
Australia’s major resources and energy exports, 2015–16 and
2016–17f
•
Australia’s resources and
energy exports are forecast to
increase by 12 per cent in
2016-17 to $176 billion
Iron ore
+35%
Metallurgical coal
+41%
LNG
Gold
+4%
Thermal coal
Despite challenging conditions for
Australian producers, the short term
outlook is for moderate growth
–4%
–2%
Copper
0%
Alumina
Crude oil
Higher export earnings will be
supported by:
- continued growth in the volume of
most bulk commodity exports
- additional production and new
capacity coming online from LNG
projects
2
Aluminium
+13%
+6%
+13%
Zinc
–11%
Nickel
–14%
0
10
20
30
40
50
$ billion
Source: ABS (2016) International Trade in Goods and Services, 5368.0;
Department of Industry, Innovation and Science (2016)
•
60
Resources and energy export earnings
revision
Generally a more positive
outlook than 6 months ago
200
Largest upward revisions were for
metallurgical coal and iron ore
A$ billion
190
Reflects unexpected persistence in
the effects from the housing
stimulus in China, and weather and
infrastructure related supply
disruptions
180
170
160
150
2010-11
2011-12
2012-13
Mar–16 forecast
2013-14
2014-15
2015-16
2016-17
Sep–16 forecast
Source: Department of Industry, Innovation and Science (2016) Resources and Energy
Quarterly September edition
•
3
How did we get here?
RBA Index of Commodity Prices
+170%
180
Index (2014-15 = 100)
160
140
120
100
Commodity prices grew by 170
per cent between 2004 and
2011
80
60
40
20
0
Sep-1996
•
Sep-2000
Sep-2004
Sep-2008
Sep-2012
Sep-2016
Source: RBA (2016) Index of Commodity Prices
Iron ore cost curve
Growth in commodity prices were
underpinned by:
- rapid economic growth in China
- an initially slow supply-side
response
- a depreciation of the US dollar
against most currencies
Over the course of a decade there
have been significant gains in
output and efficiency
Source: AME Group (2016)
Note: Cost curves represent the cash cost of mining, processing, administration and support,
royalties and freight (to the port)
•
•
4
Where are we in the commodity price cycle?
Average annual growth in prices and export volumes
2002–03 to 2011–12
2011–12 to 2015–16
30%
Metallurgical
coal
Copper
30%
Iron ore
20%
Average annual change in EUV, per cent
20%
Oil
Uranium
Thermal coal
10%
Zinc
LNG
Nickel
0%
Alumina
Aluminium
-10%
-20%
Average annual change in EUV, per cent
Gold
Zinc
Uranium
10%
Gold
Aluminium
Alumina
LNG
0%
Nickel
Thermal coal
Copper
-10%
Oil
-20%
Metallurgical
coal
-30%
-30%
-20%
-10%
0%
10%
20%
Average annual change in volume, per cent
30%
-30%
-30%
-20%
-10%
0%
10%
20%
Average annual change in volume, per cent
Source: ABS (2016) International Trade in Goods and Services, 5368.0; Department of Industry, Innovation and Science (2016)
Notes: Size of bubbles reflects total export values in last period relative to other commodities in the period
5
Iron ore
30%
Shifting (iron)sands
Share of export values by commodity
100
Per cent
80
60
Export earnings have
increased 355 per cent over
the last two decades
40
20
0
Iron ore
Thermal coal
Metallurgical coal
Gold
Other
Bulk commodities have increasingly
formed a large share of exports,
both by value and volumes
LNG
Share of export volumes by commodity
100
Per cent
80
While iron ore and coal accounted
for 52 per cent of export earnings in
2015–16, they accounted for 95 per
cent of export volumes
60
40
20
0
1995–96
Iron ore
•
•
6
1999–00
Thermal coal
2003–04
Metallurgical coal
2007–08
2011–12
Bauxite, Alumin and Aluminium
Source: Department of Industry, Innovation and Science (2016)
Notes: Volumes exclude oil and gas
2015–16
Other
Chinese demand has been the key driver of
growth
•
Principal markets for Australia’s resources and energy exports
Resources exports have grown
88 per cent (+$46 billion)
Energy exports have grown 51
per cent (+$20 billion)
70
•
60
Energy exports in 2015–16:
$59.5 b
50
Resources exports in 2015–16:
$97.6 b
Resources exports to China are
over 5 times what they were a
decade ago (+$45 billion)
•
$ billion
•
40
30
20
10
Energy exports to China are over 9
times what they were a decade ago
(+$9 billion)
China
India
Japan
7
EU28
Energy
Source: ABS (2016) International Trade in Goods and Services, 5368.0
2015–16
2005–06
2015–16
2005–06
2015–16
2005–06
South Korea Other Asia
Resources
•
2015–16
2005–06
2015–16
2005–06
2015–16
2005–06
2005–06
2015–16
0
•
Rest of world
Exports of Australia’s bulk resources
and energy commodities
Increased volumes to drive iron ore earnings
LNG will be the key driver of growth in Australian exports
•
800
80
600
60
400
40
5
200
20
0
0
20
40
15
30
10
20
10
0
2006–07 2008–09 2010–11 2012–13 2014–15 2016–17
Australia’s export earnings to increase amidst global
metallurgical coal price rally
40
150
30
100
20
50
10
0
Volume
8
A$ billion
Million tonnes
200
2010–11
2012–13
2014–15
2016–17
Value (rhs)
Source: ABS (2016) International Trade, Australia, cat. no.
5465.0; Department of Industry, Innovation and Science
•
2014–15
2016–17
Value (rhs)
Thermal coal exports volumes forecast to increase
despite decline in earnings
50
0
2012–13
•
250
2008–09
2010–11
Volume
•
2006–07
2008–09
Value (rhs)
Million tonnes
Volume
0
2006–07
250
50
200
40
150
30
100
20
50
10
0
0
2006–07
2008–09
2010–11
Volume
2012–13
2014–15
Value (rhs)
2016–17
A$ billion
50
A$ billion
100
25
Million tonnes
1000
60
A$ billion
Million tonnes
•
Outlook for Australia’s resource exports
Average annual growth in prices and export volumes, 2015–16 to 2020–21
30%
Average annual change in EUV, per cent
20%
Zinc
Alumina
Oil
Aluminium
10%
Iron ore
Copper
Metallurgical coal
0%
Uranium
Gold
-10%
-20%
-30%
LNG
Thermal coal
-20%
-10%
0%
10%
Average annual change in volume, per cent
20%
Source: ABS (2016) International Trade in Goods and Services, 5368.0; Department of Industry, Innovation and Science (2016)
Notes: Size of bubbles reflects projected export values in 2020–21
9
30%
Major risks to the short run outlook
China
Emerging economies
Developed economies
Slowing economic growth
Slowdown in growth
Outcome of the US election
Transition toward
consumption-led growth
US Federal interest rate
Global uncertainty
Reversal of the recent
improvement in China’s
housing market
10
Further information
Tim Bradley
General Manager, Economics Advice Service
Phone:
02 6102 9877
Email:
[email protected]
Follow us @economist_chief
11
industry.gov.au
Australia’s major resource regions
Pilbara — Iron ore
Share of national production (per cent)
Bowen Basin – Met and Thermal Coal
95
Share of national production (per cent)
WA Goldfields — Gold
Share of national production (per cent)
Hunter — Met and Thermal Coal
49
Share of national production (per cent)
Copper (NSW, QLD, SA, WA)
Source: ABS 5204.0 table 5; ABS Census 2011; Cost curve estimates from AME.
12
54
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