Australia Cuts Commodity Sales Forecast 10% on Crisis

By Madelene Pearson

Dec. 15 (Bloomberg) -- Australia, the world’s largest shipper of coal, iron ore and wool, cut its commodity exports forecast by 10 percent because of the global financial crisis that may continue to hinder any recovery until the second half next year.

Overseas sales are estimated at A$192 billion ($127 billion) in the year ending June 30, 2009, the Canberra-based Australian Bureau of Agricultural and Resource Economics said today in an e- mailed statement. That compares with its September forecast of A$214 billion and revised sales of A$148 billion a year earlier.

Mining companies including Rio Tinto Group are cutting output as the global recession and credit crunch limit demand, driving prices down. A recovery in demand for energy and minerals commodities is expected in late 2009, bolstered by China’s 4 trillion yuan ($584 billion) stimulus package, the bureau said.

China is “going to be quite critical to any recovery,” said Gerard Burg, minerals and energy economist at National Australia Bank Ltd., who expects “modest” recovery in the second half of 2009 and into 2010. “For commodities, it’s going to be dependent on growth in the construction and manufacturing sectors and also their infrastructure construction.”

Australia’s exports of minerals and energy are forecast at A$159 billion, from about A$180 billion in September, the bureau said. That’s still 37 percent higher than a year earlier. China, the world’s biggest buyer of raw materials and Australia’s biggest customer for minerals, may grow 8 percent next year from an estimated 9.6 percent this year, it said.

Copper Drops

The Reuters/Jeffries CRB Index of 19 materials has slumped 52 percent from a July record and Rio Tinto has said the global outlook is “uncertain” in the short term. Copper is down 52 percent this year, nickel has fallen 60 percent, while zinc has lost 55 percent and oil 51 percent.

“The main adverse effect of the global financial crisis has been the sharply lower world prices for minerals and energy commodities,” Phillip Glyde, the bureau’s executive director, said in the statement.

Earnings from energy commodities are estimated at A$80.8 billion, while sales of metals and minerals are predicted to be A$78.3 billion.

The price of West Texas Intermediate crude oil may average $99 a barrel in calendar 2008, compared with an earlier estimate of $107, the bureau said. Crude reached a record $147.27 on July 11. Prices are tipped to fall further to average $59 a barrel in 2009, lower than the $98 forecast in September.

Australian Dollar

Prices for steelmaking materials iron ore and coking coal, Australia’s top two export earners, are expected to fall in the year starting April 2009, the bureau said. Earnings from iron ore, coal and liquefied natural gas account for most of the growth in energy and minerals sales forecast this fiscal year.

The price of gold may fall 7 percent to $810 an ounce in 2009, the bureau said. Bullion may average around $870 an ounce this year, it said.

To be sure, recent falls in the Australian dollar will support export earnings should they be sustained, the bureau said. The local currency has slumped 30 percent so far this fiscal year against its U.S. counterpart. The bureau cut its average Australian dollar forecast to 70 U.S. cents in 2008-2009, from a previous estimate of 85 cents.

“The change in the exchange rate has really masked some of the falls,” National Australia’s Burg said.

Earnings from farm exports are forecast at A$29.4 billion in fiscal 2009, compared with the A$30 billion September forecast and 7 percent higher than a year earlier.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net