Australia has been out of luck lately. The country’s consumer watchdog just this week warned the east coast could face a gas shortage as soon as this year. Smelters and miners are complaining about high energy costs and asking for government help. And now the industry department is warning that commodity exports are about to weaken on trade headwinds.
In a new report, the Australian Department of Industry, Science and Resources said it expected commodity exports to keep rising over this year and next, but income from them is set to weaken—because of lower commodity prices. The trend would be an extension of the decline in commodity export profits from the 2024/25 fiscal year, the department said.
By the numbers, the Department of Industry, Science and Resources expects A$2 billion ($1.3 billion) lower profits from commodity exports for fiscal 2024/25, falling further by A$4 billion ($2.6 billion) in the current fiscal year that begins today, and moving lower still, by A$8 billion ($5.3 billion), in fiscal 2026/27.
It seems the Australian government expects a consistent oversupply situation in most of its export commodities, citing growth in supply. For instance, iron ore supply globally is set to keep growing over the next two years, leading to consistently soft prices, affecting Australia’s export earnings. Iron ore accounts for as much as a quarter of the country’s total resource and energy commodity exports, so an impact on iron ore profits is an impact on total profits.
Indeed, the industry department sees iron ore export profits sliding from A$116 billion in 2024/25 to A$105 billion in the current fiscal year and further to A$97 billion in fiscal 2026/27. In U.S. dollars, the decline is from $75.6 billion to $69 billion in 2025/26, and to $63.7 billion in 2026/27.
Interestingly, over the longer term, it could be Australia itself contributing to the price decline trend. A new iron ore deposit was recently discovered in Western Australia that holds an estimated 55 billion metric tons of the basic metal, valued at some $6 trillion.
The outlook for liquefied natural gas is not much better than the one for iron ore. According to the industry department, while it prepares for weaker iron ore prices, Australia’s commodity industry should brace for softer LNG prices as well. Again, the reason cited for the prediction is robust global supply. Most of that, according to analysts, is set to come from the United States but Canada just shipped its first LNG cargo from the Shell-led LNG Canada facility in British Columbia, so there will be non-U.S. supply growth as well, most likely.
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Speaking of Shell, it is not even half as bothered about LNG demand, supply, and prices as the Australian government appears to be. In fact, Shell expects global LNG demand to rise by 60% by 2040, which should theoretically support reasonably healthy price levels for all producers.
Coal, meanwhile, will remain a major contributor to Australia’s energy commodity earnings, despite the government’s determination to phase out hydrocarbons from the country’s energy system. Yet profits from thermal coal exports, the sort used in electricity generation, are expected to follow the decline in iron ore and LNG. One big reason for this may be China’s boost in domestic coal supply, which has reduced its demand for imported coal. Metallurgical coal exports, however, are seen remaining steady over the next two years, suggesting healthy demand from the metallurgical sector abroad.
There are a couple of commodities that are enjoying stronger growth in demand than in supply, with profits from their exports set to rise substantially. One of them is gold, seen rising to the top third place among Australia’s commodity export profit contributors. The other is copper—exports are seen surging by 25% this fiscal year. These metals, it seems, are going to remain in strong demand even as iron ore falters.
By Irina Slav for Oilprice.com
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