Australian exports are forecast to fall from $467 billion in 2022–23 to $352 billion by 2024-25.
Falling coal prices are expected to cost the Australian economy $58 billion by 2025, according to the latest Resources Energy Quarterly on Sept. 3.
A slowing Chinese economy and a decline in coal use in Europe are expected to trigger the fall in exports from $400 billion in 2023–24, down from a record $467 billion in 2022–23.
The report also forecasts a further decline to $352 billion in 2024–25 across the entire mineral export sector.
Despite the end of COVID-19 restrictions, the report says China’s growth will remain relatively weak.
“Relatively slow growth in the Chinese economy in 2023 reflects a range of cyclical factors—including the slowdown in Western economies in 2023 and a downturn in the Chinese property sector,” said the executive summary of the report.
“Weaker economic growth in China has led to bouts of weakness in iron ore and base metal prices, but recent Chinese stimulus measures and low global inventories of most base metals have helped limit price falls.”
Queensland's Royalty Scheme Falters At 1st Hurdle
The shifting economic headwinds will also likely cost the Queensland government billions in royalties just months after laws were changed to capture a larger portion of mining giants' profits.
The royalties—considered the highest in the world—netted the Labor government a $12 billion surplus last year, with the Palaszczuk government forecasting royalty revenues to drop to $5.3 billion in 2023-24 and $4 billion in 2024-25.
The contentious royalty scheme—introduced amid soaring state debt—saw miners slapped with a 20 percent royalty for coal sold for over $175 per tonne, 30 percent over $225 per tonne, and 40 percent over $300 per tonne.
Considering the uncertainty around any new coal projects in Australia, the report also found that there is only coal mine capacity to last the current decade.
Prices for metallurgical coal are also expected to drop to about $200 a tonne from $255.
Mixed Future Ahead for Australian Miners
While growth in Asia is expected to offset Europe’s move away from coal to meet climate targets, challenges remain.
Led by rising demand in India, world metallurgical coal trade is expected to increase from 312 megatons in 2022 to 316 megatons by 2025.
However, the REQ report also said new rail links in Asia have resulted in a surge of Mongolian coal exports to China in the past year, limiting Australia’s share of the market.
Meanwhile, Russia has diverted some coal exports to China after Western nations banned Russian exports.
Yet the weather has proven to be positive for the Australian coal sector.
Drier than normal conditions could reduce the risk of mines and transport routes being flooded. However, El Niño driven droughts in Indonesia could make it difficult to barge thermal coal through certain waterways.
As for the overall commodity and energy export market, the Australian federal government remains optimistic.
“While overall export revenue is easing from record highs, Australia’s resources and energy exports remain strong and continue to underpin Australia’s economic well-being,” said federal Resources Minister Madeleine King.
“Demand for Australian minerals is growing as the world works to build the technology needed to decarbonise.”
The REQ report also says that supply cuts by some major oil producers are helping stabilise prices with the Brent crude oil price expected to fall to around US$79 a barrel by 2025.