The September 2020 edition of the Resources and Energy Quarterly (REQ) was released today by the department’s Office of the Chief Economist. The latest REQ provides a deeper insight into the impact of the COVID-19 pandemic on Australia’s resources and energy sector.
This edition shows that Australia’s resources and energy exports are weathering the COVID-19 pandemic well, despite adverse impacts on a number of commodities. Australia’s resources and energy (R&E) exports reached a record $290 billion in 2019–20, supported by strong prices for gold and iron ore. R&E export earnings are expected to fall over the outlook period, to $256 billion in 2020–21 and $252 billion in 2021–22, driven by generally lower prices.
China, which initially faced the worst of the outbreak, now appears to be among the world’s strongest performing economies. China’s economic recovery — which has been supported by significant stimulus measures — and its pre-existing dominance of the iron ore market have kept conditions robust for global iron ore markets despite a collapse in steelmaking across a number of other countries. The impacts of COVID-19 in Brazil — the world’s second largest supplier — have also led to supply side disruptions, pushing prices for seaborne iron ore up significantly in recent months. This resulted in Australian iron ore export earnings exceeding $102 billion in 2019–20, making iron ore the first commodity to earn more than $100 billion in a single year.
Australia is also gaining significant benefits from rising gold prices, driven by investors seeking safe havens. Australia is expected to become the world’s largest gold producer in 2021, overtaking China. Gold is set to become the third biggest export earner in the current financial year, after iron ore and LNG.
On the downside, commodities linked to energy have faced increasing difficulty in recent months. Conditions for coal exporters have become more difficult as a result of the COVID-19 outbreak, which has occurred in conjunction with a large drop in the number of coal plants planned for construction around the world. Coal export earnings are expected to fall by around one-fifth in 2020–21, as prices fall and volumes stabilise; LNG exports are expected to fall, as low prices impact.
On balance, Australia’s production and export of commodities are expected to remain robust over the next two years, despite the worst global downturn in many decades. This strength reflects the diversity of our commodity profile as well as the huge sums invested in technology and innovation over the past 20 years.
For more information and to access the report, visit Resources and Energy Quarterly: September 2020.
Australia’s resource and energy export values and volumes.