Massive Boost to Australia’s Commodities

Russia’s invasion of Ukraine on commodity prices chiefly concentrated on crude oil and natural gas in Europe. Still, a significant increase in Australia’s expected natural resource revenues demonstrates the broader impact.

Commodity export earnings would hit a new high of A$424.9 billion ($318 billion) in the fiscal year ending June 30, 2022.

It is more than a third higher than earnings in 2020-21; about A$50 billion higher than the December quarter result. According to the Office of the Chief Economist at the Department of Industry, Science, Energy, and Resources, the increase in the price of energy commodities since Moscow’s Feb. 24 attack on its neighbor is driving the spike.

Iron ore export revenues should fall to A$135 billion in 2021-22; down from A$158 billion in 2020-21, due to weaker prices; quantities should increase to 897 million tonnes from 867 million. However, the price forecast for iron ore for 2021-22 is $118 per tonne.

Stellar Coal

Australia is the world’s top supplier of metallurgical coal; it’s a crucial component in the steelmaking process; moreover, this commodity has outstanding performance.

Metallurgical coal, also known as coking coal, is predicted to nearly triple in value to A$65 billion in 2021-22, as the expected price for the year rises to $348 per tonne from $123 in 2020-21.

This price projection appears to be conservative once more. Since the beginning of the year, the Singapore Exchange contract (SCAFc1) has traded above this level, including a spike to $635 per tonne in mid-March. However, thermal coal prices are still significantly above the Australian government’s prediction of $193 per tonne for 2021-22. Export earnings would already be A$45 billion at the predicted level, over three times the A$17 billion achieved the previous year.

Russia is a significant exporter of metals, so it’s not just energy commodities benefiting.

Export volumes of the industrial metal predict to fall by 6.9% in 2021-22; however, Australia anticipates earnings from aluminum exports to climb to A$5.8 billion from A$3.9 billion; nickel to A$7 billion from A$3.9 billion; finally, copper to A$13 billion from A$12 billion.

Overall, it’s evident that the Russia-Ukraine situation will provide a significant revenue boost to Australia and other diversified commodities exporters.

The length of time it lasts will be determined by whether the conflict can resolve and Russia re-admitted to the Western world’s economies and the extent to which Russia’s commodities exports are self-sanctioned.