Resources earnings to ease as long-term outlook improves

Australia’s resources and energy export earnings are forecast to return to long-term trends over the coming two years on the back of softer world growth and improved supply, but the long-term outlook looks increasingly positive as prices stabilise and demand from India grows.

The March 2024 Resources and Energy Quarterly (REQ) from the Department of Industry, Science and Resources shows while export volumes are steady, earnings are forecast to be down by 11 per cent in 2023–24 to $417 billion from the record $466 billion in 202223.

Export earnings are forecast to continue to ease to $369 billion in 2024–25, before starting to level out over the rest of the outlook period as the decline in commodity prices slows. 

The forecasts are an improvement on December REQ forecasts of $408 billion in 2023–24 and $348 billion for 2024–25. 

The REQ shows while world economic growth remains soft, key markets have continued to support commodity demand.

China will remain a huge influence on resource and energy commodity markets, but India is likely to account for a significantly larger share of world commodity demand by 2029. 

Minister for Resources and Northern Australia Madeleine King said the five-year outlook in the March 2024 REQ showed a positive outlook for resources and energy exports which continue to support jobs, provide secure and reliable energy supplies to countries in our region, and underpin Australia’s economic wellbeing.

“While global prices are easing, the March 2024 Resources and Energy Quarterly shows demand is likely to be sustained for commodities used in low emissions technologies, including iron ore, copper, aluminium and lithium,” Minister King said.

“The road to net zero runs through Australia’s resources sector.

“Our resources and energy industries support more than 300,000 Australian jobs directly and indirectly, supporting regional communities and our national economy.”

The March 2024 REQ finds that despite weaker prices in recent months, iron ore exports are set to rise to $136 billion in 2023-24 from $124 billion in 2022–23, before easing back to $111 billion next year and around $83 billion by 2028–29 (in real terms).

Nickel and lithium prices have been pushed to five-year lows due to surging supply and softer growth in demand. It finds the medium-term outlook for Australian lithium and nickel exports to remain substantial.

Nickel export revenue is forecast at $3.6 billion this financial year and $2.4 billion next year compared with $5.0 billion in 2022–23. Lithium export revenue is forecast to drop to $11.3 billion this year from $20.1 billion in 2022–23, despite a modest increase in export volumes.

Australian copper export earnings are forecast to reach $12.1 billion in 2023–24. Higher export volumes and rising prices are expected to see copper export earnings reach $16.8 billion (in real terms) in 2028–29.

Driven by lower LNG prices, LNG earnings are forecast to ease to $72 billion this financial year from $96 billion last year, before easing to $45 billion by 2028–29.

Earnings from metallurgical coal, used for steel making, are expected to be $56 billion in 2023–24, down from last year’s $62 billion, before easing further over the outlook period. Thermal coal earnings are forecast at $36 billion in 2023–24, down from $66 billion last year, before easing further over the outlook period.

The March 2024 Resources and Energy Quarterly is available on the Department of Industry, Science and Resources website.