Australia lifts FY 2011-12 iron ore export forecast by 2.4pct

Thursday, 15 Dec 2011

Reuters reported that Australia has lifted its forecast for iron ore exports by 2.4% to a record 460 million tonnes in 2011-12 as producers dig more mines to feed a growing hunger in China for imported ore to make steel.

Iron ore prices have weakened this quarter as questions persist over China's future growth prospects, but that has done little to deter mega producers such as Rio Tinto and BHP Billiton from earmarking billions of dollars to expand in Australia's western iron range.

A forecast for metallurgical coal was revised down, however, with the Bureau of Resources and Energy Economics now predicting exports will drop to 150 million tonnes, versus 156 million in its forecast on Sept.20, after a series of floods and strikes hobbled output.

Australia is the world's biggest supplier of iron ore and metallurgical coal, also known as coking coal and used in smelting, with Asian steel mills, particularly in China, the key buyers of both commodities.

Australia, with a low population and an abundance of mineral wealth, is also a major exporter of thermal coal for power generation along with copper, nickel and gold. Exports of thermal coal are forecast to total 163 million tonnes in 2011-12, a modest upward revision from 155 million tonnes previously.

Mr Quentin Grafton executive director and chief economist at BREE said that "The increase in iron ore and thermal coal export volumes reflects recent expansions to mine and infrastructure capacity."

Australia's AUD 1.3 trillion economy is enjoying a once in a century mining boom powered by Asian demand and has been largely resilient to the last two financial crises in Europe and the United States. Economists and political leaders no longer complain their country is regarded as little more than a quarry supplying the emerging industrial powerhouses of Asia with raw materials.

Mr Grafton said that "Despite the uncertainty surrounding the outlook for some European economies, Australia’s export volumes for most commodities have remained strong in the second half of 2011, while prices for many commodities have remained at historically high levels."

According to BREE's latest quarterly commodities outlook, non farm commodity export earnings are forecast to climb to a record AUD 206 billion in 2011-12. That's down from its September 20th 2011 forecast of AUD 215 billion but still 15% YoY higher.

Rio Tinto, the world's second biggest iron ore producer, late last month raised its iron ore expansion target by 20 million tonnes to 353 million tonnes a year by the first half of 2015, from around 240 million tonnes a year now. There is also an option to increase annual capacity further to 453 million tonnes.

(Sourced from www.reuters.com)