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Australia sees longer commodity surge from Ukraine’s war with Russia: Russell

By on October 4, 2022 0

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LAUNCESTON – Australia expects the increase in its commodity export revenue caused by Russia’s invasion of Ukraine to last until 2024, raising its forecast for the year in course and the following year.

The Australian government’s commodities forecaster said in its latest quarterly report released on Tuesday that export earnings will hit a record A$450 billion ($293 billion) in the 2022-23 financial year which started July 1.

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The figure was up from A$419 billion in its previous report and will eclipse the previous record high of A$421.6 billion for the year just ended June 30, which was itself up. 37% on export revenues for the 2020-21 financial year.

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For 2023-24, export earnings were pegged at A$375.5 billion, down from A$338 billion in the previous report.

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

The expectation of record new export earnings for the current year, however, was tempered by an assessment that downside risks have increased since the last quarterly outlook in July.

“Downside risks are substantial,” the Office of the Chief Economist of the Department of Industry, Science and Resources said in the report.

These include inflation proving more difficult to bring down than expected, tighter global financial conditions inducing over-indebtedness in emerging and developing economies, new outbreaks of COVID-19, and continuing problems in the global economy. Chinese real estate sector, the report said.

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Certain risks could also favor Australia’s exports, such as the interruption by Russia of its gas exports to Europe.

The report notes that some of Russia’s exports of crude oil, coal and natural gas are blocked as EU import sanctions begin to take full effect from December this year.

It is likely that not all of Russia’s commodity exports can be diverted to other buyers such as China and India, which will reduce overall global supply and keep prices high.

This can be seen in the report’s forecast that LNG export revenues will grow to A$90 billion in 2022-23, up 29% from the previous financial year, although volumes are expected to fall to 80 million tons of super chilled fuel from 83 million in 2021-22.

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The other big winner on the energy front is thermal coal, used mainly in power stations, with the government forecasting export earnings from 2022-23 to be A$62 billion, up 35% compared to the previous year.

But thermal coal also shows the global market will likely have weathered disruption from Russia by FY 2023-24, with the report predicting export revenue will fall to A$38 billion, down 38, 7% compared to forecasts for the current year.

LITHIUM OVERVOLTAGE

The government also expects the currently high prices of energy products to accelerate the transition to renewable energy.

Export revenue from lithium, a key battery component, is expected to jump 182% to A$13.8 billion in 2022-23 as the price more than doubles and shipments also increase by 15% to 2 609 tons.

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Other metals considered essential to the energy transition are also expected to show strong revenue gains, with nickel exports expected to reach A$5.1 billion in 2022-23, from A$4.4 billion in 2021-22 , while copper exports are expected to reach A$14 billion from A$12 billion.

Amid strong earnings forecasts for energy exports, both fossil and renewable, there is a note of caution, and that is the expected revenue decline from iron ore, as well as coking coal, the fuel used to transform the ore into raw steel.

Iron ore is Australia’s biggest resource export, but the government expects revenue to fall to A$119 billion in 2022-23 from A$134 billion in 2021-22, even though volumes are expected to increase from 875 million to 903 million tonnes.

A drop in the forecast price to $97 per ton on average in 2022-23 from $119 in 2021-22 is the culprit, and the risk is that even the lower price forecast is optimistic and dependent on Beijing’s ability to stimulate steel-intensive sectors such as construction. .

Coking coal export revenues are expected to fall to A$58 billion in 2022-23 from A$66 billion the previous year, even as volumes increase to 174 million tonnes from 162 million.

(Edited by Richard Pullin)

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