The resources and energy sector has been a longstanding growth engine of Australia’s economy. Reportedly, the country’s revenues from the sector are likely to increase by up to 25 percent in 2016-17. This is attributed to the recent surge in demand for LNG and lithium.
According to Australia’s Department of Industry, Innovation and Science, the energy and resources export earnings are set to reach $205 billion in 2016-17 on the basis of preliminary estimates. However, in 2017-18 the export earnings are likely to witness a slight decline, which will apparently continue till 2019.
Higher production of steel in China that is leading to more consumption of metallurgical coal and iron ore is linked with the current rise in steel manufacturing raw material prices. Moreover, the partially-reserved restrictions imposed by the Chinese government on coal mining operations in the country is considered as a major reason behind the rise in metallurgical coal prices. On the other hand, some experts suggest that the prices are most likely to drop over the next two years. Also, the demand for resource and energy commodities, especially for steel manufacturing is anticipated to slow down in 2018-19 due to a potential downtrend in construction activity and infrastructure spending in China. Hence, prices of metallurgical coal and iron ore are likely to get impacted by the sluggish demand growth.
The global demand trend and increasing low-cost supply is set to play a major role in lowering the resource and energy commodity prices, which is already visible in the iron ore category. Despite the aforementioned factors, the Australian resources sector – particularly the one present in the westerns part of the country is likely to continue to register impressive growth rate primarily driven by the robust demand of LNG. By 2019, LNG is expected to contribute nearly $14 billion to the countries resources and energy exports. At the same time, falling iron and coal ore prices are estimated detract around $9.8 billion and $11 billion from export revenues, respectively.
The overall earnings from resource and energy export are also set to incur a marginal slump over the next two years. Meanwhile, export of battery component commodities is also considered as a key growth area for the country’s resources industry. Australia has one of the largest lithium deposit at Greenbushes, which is located in the South West region of the country. Therefore, the industry seems ardent on tapping the opportunities available in the global lithium market as well.