Posted on 27 Jun 2013
Australia, the world's biggest producer of iron ore,
forecast a 14 percent rise in exports in the 2013/14 fiscal year as the
country's big miners press ahead with multi-billion dollar expansions despite
signs demand growth is softening.
Slower than expected economic growth in China is forecast to
weaken prices for iron ore, Australia's largest export earner, further next
year.
The Bureau of Resources and Energy Economics (BREE) forecast
iron ore exports of 610 million tonnes in the financial year that begins July 1
after upgrading its forecast for the current year by 11 million tonnes to 533
million tonnes.
"Concerns over moderating Chinese economic growth weigh
on almost all commodity prices, and particularly iron ore which is forecast to
trend downwards," BREE said in its report.
The government agency also forecast a 5 percent rise in
exports of thermal coal and 6 percent rise in metallurgical coal, despite
softening demand and global oversupply.
"Thermal coal prices are expected to weaken as
increased Australian supply competes with higher U.S. exports," BREE said
in the report.
The forecast for higher coal output comes with the opening
of new mines and despite job cuts in the sector. In the latest example, Peabody
Energy Corp and Glencore Xstrata plan to cut around 500 coal mining jobs in
Australia, a company official and trade publication said.
Australian coal miners have cut an estimated 9.4 million
tonnes of thermal and coking coal production through mine closures, but another
66.3 million tonnes of production is coming online through the end of 2013,
still leaving the market heavily over supplied, according to UBS.
Despite weakening prices, total energy and resource exports
were forecast to rise 11 percent to A$197 billion ($182 billion), helped by
expectations of a depreciation in the Australian dollar.
A dip in the value of the local dollar from A$1.03 to the
U.S. dollar in 2012-2013 to A$0.94 in 2013-2014 could increase the value of
Australia's iron ore exports by around A$6 billion, according to BREE.
Iron ore prices have gone from boom to bust and partly back again - hitting a high above $190 a tonne in 2011 and a low under $90 in 2012 - in the three years since the sector switched from once-a-year fixed pricing to a spot market.
BREE forecast contract prices for iron ore at around $117 a
tonne this year, while spot prices for 2014 are forecast to dip, averaging
around $112 a tonne due to increased supply.
Benchmark 62-percent grade iron ore was trading around $116.60 a tonne this week, its lowest in more than a month, according to data provider Steel Index.
Most of the additional tonnage from Australia in 2013/14
will come from expansions by Rio Tinto, BHP Billiton and Fortescue Metals
Group, with smaller producers including Atlas Iron and Gindalbie Metals contributing
to a lesser extent.
Mining executives have argued that the expansion is needed to ensure their companies are positioned to take advantage of the next upturn in the market and benefit from better economies of scale.
