The June 2023 edition of the Resources and energy quarterly (REQ) was released today by the Department of Industry, Science and Resources.
The fallout from the Russian invasion of Ukraine and US dollar strength helped deliver an estimated record $460 billion in earnings for Australian exports of resource and energy commodities in 2022–23. However, looking forward, export earnings are expected to fall as energy prices go back toward levels traded prior to the Russian invasion of Ukraine.
Australian energy export earnings are set to fall noticeably. LNG earnings are forecast to fall by $24 billion to $68 billion in 2023–24, as LNG prices ease from the high levels reached in 2022. A further fall of $8 billion is forecast in 2024–25. Thermal coal exports are also forecast to drop sharply, down from $64 billion in 2022–23 to around $38 billion in 2023–24 and $30 billion in 2024–25. Total export earnings are expected to be $390 billion in 2023–24 and then fall to $344 billion in 2024–25.
In contrast, exports of metals used heavily in the energy transition are expected to remain over $40 billion, having doubled since 2021–22. A special topic chapter examines some metals used in batteries that are central to the global energy transition.
The outlook is largely unchanged from the March 2023 REQ. Slower world economic growth and improving supply conditions are driving most commodity prices lower. Tighter monetary policy is causing a slowdown in economic growth in the major Western economies, where labour markets have been tight. Falling energy prices will also take some of the pressure off central banks to keep tightening monetary policy.
The Chinese economy is slowly gathering pace, as a result of the cessation of COVID lockdowns. The savings buffer built by Chinese households during the pandemic is estimated to have been much smaller than those built in the Western economies. This suggests that the recovery will be relatively less robust than seen elsewhere, but also less likely to lead to a rise in inflation as experienced in Western economies.
Transport and infrastructure constraints remain a huge obstacle to the full diversion of Russian energy exports to nations with no sanctions. The net result is a fall in world energy supply, as some Russian output is stranded. Barring much weaker than expected global demand, energy prices are therefore likely to remain relatively high over the outlook period.
Australian thermal coal exports to China are picking up strongly but are not yet back to levels reached in 2019–20 – before trade impediments were imposed by Beijing in early 2020. Chinese buying adds significant competitive pressure to the markets for Australian coals, offsetting some of the impact of weaker world economic growth and energy demand on expected coal prices.
Geopolitical tensions continue to escalate the drive for secure the supply chains of metals and low emission technologies used to meet ‘net zero’ climate ambitions. The US Inflation Reduction Act (IRA) passed last August will influence the pace of development and location of future supply of key metals. Australia is well placed to seize the opportunities from the IRA and the broader energy transition, given our rich geological reserves, expertise at extracting minerals and track record as a reliable producer and exporter of energy and resources.