‘Evenly balanced’ risks means lower commodity prices, but robust volumes

LAUNCESTON, Australia, Oct 3 (Reuters) – Global commodity prices are heating up, with risks to the outlook “even”.

That’s the Australian government’s relatively optimistic assessment in its latest Resources and Energy Quarterly, published on Tuesday.

In effect, forecasters in the government of one of the world’s largest exporters of resources are saying that while commodity volumes are trending well and are expected to increase over the next few years, This means that the amount of money spent will decrease.

Australia is the world’s largest exporter of iron ore, coking coal, liquefied natural gas (LNG) and lithium, and ranks second in thermal coal and third in gold and copper ore and concentrate.

Australia’s Department of Industry, Science and Resources said in a report that revenue from primary commodity exports is expected to be A$400 billion ($254 billion) in the year starting July 1.

This is down from the record high of A$466.7 billion for the just-passed 2022-23 financial year, which was largely due to soaring LNG and coal prices after Russia invaded Ukraine in February last year. .

Revenues from commodity exports are expected to decline further in 2024-25, falling to A$352.3 billion. The decline in profits was also the result of supply chains adapting to losses and rerouting of Russian crude oil, manufactured goods, coal and LNG exports.

But that’s also because China, the world’s largest commodity importer, is recovering more slowly than expected, while the global economy faces uncertainty.

“The risks appear to be evenly balanced,” the report said. “The outlook for the global economy over the outlook period remains relatively modest growth, but unemployment remains historically low and household consumption This is contributing to maintaining profitability.”

Revenues are expected to fall even though the government expects volumes for most exports to increase or remain roughly flat from current levels.

Sales increased, profits decreased

Iron ore remains Australia’s most valuable export, with the government forecasting profits of A$120 billion this year, down from A$124 billion in 2022-23, but ahead of 2024-25. That’s more than the A$99 billion expected for 2020.

Exports of steel raw materials are expected to increase from 895 million tons in 2022-23 to 920 million tons this year and 933 million tons in 2024-25.

This trend of rising exports and falling revenues is repeated for coke, thermal coal, and lithium, an important energy transition metal given its use in battery storage.

Coking coal volumes are projected to increase from 157 million tonnes in 2022-23 to 172 million tonnes in both 2023-24 and 2024-25, mainly for steel production. Revenue from fuel used is forecast to fall to A$47 billion this year from A$62 billion last year.

Thermal coal volumes are expected to increase from 182 million tonnes in 2022-23 to 202 million tonnes this year and 203 million tonnes in 2024-25, while power plant fuel revenues will It is expected to fall to A$36 billion from A$66 billion last year. That’s A$1 billion this year, and just A$28 billion in 2024-25.

Despite Australia’s important role in the energy transition, the Australian government expects export earnings to fall from A$20 billion in 2022-23 to A$18 billion this year and A$16 billion in 2024-25. ing.

Shipments are expected to increase from 3.33 million tons in 2022-23 to 4.03 million tons in 2024-25, but this year’s shipments have remained almost stable at 3.32 million tons.

One of the products the government expects volumes to fall in is LNG, with exports of 82 million tonnes in 2022-23 falling to 81 million tonnes this year and 79 million tonnes in 2024-25.

The slight decline in LNG exports is due to expected maintenance programs, but the lack of new projects will see Australia lose its crown as the world’s biggest exporter of the cryogenic fuel to the US this year.

The overall message from the Australian Government’s Commodities Outlook is that with evenly balanced risks, volumes will remain strong but prices will be lower.

The opinions expressed here are those of the author, a Reuters columnist.

Our standards: Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not necessarily reflect the views of Reuters News, which is based on principles of trust and is committed to integrity, independence and freedom from bias.

Clyde Russell is Reuters’ Asian commodities and energy columnist. In his 33 years as a journalist and editor, he has covered everything from wars in Africa to resource booms and current struggles. He was born in Glasgow, has lived in Johannesburg, Sydney, Singapore and currently splits his time between Tasmania and Asia. He writes about commodity and energy market trends with a particular focus on China. Before becoming a financial journalist in 1996, Clyde covered civil wars in Angola, Mozambique and other African hotspots for Agence France-Presse.