Commodities exports have Australian record in sight

CANBERRA - Australia, the world's biggest supplier of coal, iron ore, and alumina, increased its forecast for commodity export earnings by 2.6 per cent amid higher copper and gold prices and increased sales of iron ore.

The Australian Bureau of Agricultural and Resource Economics said sales of commodities from beef to zinc would reach a record A$120 billion ($127.8 billion) in the year to June 30. That compares with the bureau's September 19 forecast of A$117 billion and sales of A$98 billion in 2004-05.

Record prices for iron ore, copper and oil, and soaring Chinese demand are fuelling $29.4 billion of new mineral projects in Australia by BHP Billiton and rivals, increasing the country's commodity revenue.

"There are some higher prices coming through but the larger volumes are going to be the real kicker," said Westpac senior economist Justin Smirk.

"Even if there is a moderation of prices over the next few years, the magnitude of volumes coming on board means that those sectors will probably be sizeable contributors to export recovery."

Australia's exports of minerals and energy, such as copper and oil, are expected to be A$90.3 billion in 2005-06, up from a previous forecast of A$87.2 billion in September. That compares with A$68.6 billion in 2004-05.

Export returns from metals and other minerals are forecast to reach A$48.2 billion in the year ended June 30, up from a previous forecast of A$45 billion, because of higher prices for iron ore, copper and gold.

"The strength of Australia's minerals and energy exports continues to underpin the nation's commodities sector," said Brian Fisher, the bureau's executive director.

Iron ore exports are forecast to increase 72 per cent to A$14 billion in 2005-06. Iron ore prices in the 2006-07 Japanese financial year may rise by 11.5 per cent. That compares with an earlier forecast for an 18 per cent decline.

"This increase reflects stronger iron ore import growth from China, high spot prices for iron ore, and constraints to increased export growth from Australia, Brazil and South Africa," the bureau said.

Gold prices will average US$475 ($672) an ounce in 2006, compared with a previous forecast of US$414 an ounce, the bureau said. Gold futures on the New York Mercantile Exchange have risen 22 per cent this year because of demand from jewellers and as investors added the precious metal to their portfolios.

Copper prices may rise 28 per cent in 2005 to an average of US$3660 a ton. That compares with the bureau's earlier forecast of US$3440.

Export earnings from coal, liquefied natural gas and crude oil are forecast to be A$42 billion, down from the A$42.2 billion forecast in September. Coking coal exports will rise 64 per cent, while sales of thermal coal, used by utilities, will rise 13 per cent and crude oil 34 per cent.

"Growth in world demand for most of the major minerals and energy commodities is forecast to ease from current levels in 2006, reflecting weaker assumed growth in global industrial activity," the Government said.

Exports of agricultural commodities might reach A$27.7 billion, up from an earlier forecast of A$27.2 billion, the bureau said. It expects wheat and other grain sales to increase 5.4 per cent and beef and lamb export revenue to fall 2.1 per cent.

- BLOOMBERG