Why has Australia upped its coal and iron ore forecasts?

By Enterprise Monkey

On Friday, Australia raised price forecasts for its two highest-grossing commodity exports: iron ore and coal. The reason? An unexpected increase in demand from Chinese steelmakers as the country’s construction activity picks up.

Figures released by the Pilbara Ports Authority this week show that iron ore shipments from Australia’s largest loading terminal, Port Hedland, totalled 41.838 million tonnes last month. August saw a record shipment level of 42.875 million tonnes.

As a result, the Department of Industry, Innovation and Science has raised the iron ore price outlook this year by 10 percent — from $44.20 per tonne to $48.50. The coking coal forecast was even brighter, jumping 16 percent from $85.60 a tonne to $99.40.

"Prices for most construction and steel making raw materials continued to grow in the last three months, despite expectations of decline, because of unexpectedly resilient demand from China's construction sector and unforeseen supply disruptions," said Mark Cully, the Department's Chief Economist.

Is it sustainable?
Both of the recently released forecasts are below current market prices. In its new Resources and Energy Quarterly report, the Department of Industry, Innovation and Science cast doubt over whether China’s construction boom is likely to continue.

“Despite a modest drawdown in inventories in the first half of 2016, the residential property market remains oversupplied”, the department recorded in the report. “The housing market has now matured and there is oversupply in the less desirable, smaller and inland cities.”

Regardless of the price of commodities, it appears as though export levels will continue to rise. Two of Australia’s three largest iron ore miners, BHP Billiton and Fortescue Metals Group, are targeting a combined record of 440 million tonnes of exports.

Business Review Australia & Asia's October issue is live. 

Follow @BizReviewAU on Twitter. 

Business Review Australia is also on Facebook. 



Featured Articles

Top 10 female executives leading Japan's charge for change

As Japan pledges a 30% target for women executives at big firms by 2030, we spotlight 10 female corporate leaders blazing a trail in the country

Top 10 most valuable unicorns in China – phones to drones

Home to the world’s most valuable unicorn, not to mention the fastest growing, China may be trailing the US on numbers, but it is catching up – and fast

Top 10 fastest-growing energy companies in the APAC region

Business Chief takes a look at the top 10 fastest-growing energy companies in the APAC region, according to rankings from S&P Global Commodity Insights

Top 10 Chief Financial Officers in India

Corporate Finance

Top 10 largest companies Malaysia and the CEOs who helm them

Leadership & Strategy

5 high-profile CEO moves across Asia-Pacific this month

Leadership & Strategy