Australia’s iron ore addiction grows to record levels

Australia’s dependence on China has reached extreme levels, with almost half the nation’s commodity exports now expected to be iron ore destined for its steel mills.

The Industry Department on Monday revised up its forecasts for resource and energy exports, predicting iron ore exports would reach a record $149 billion for the 2020-21 financial year.

Iron ore now accounts for almost 50 per cent of Australia’s mineral exports.Credit: Ian Waldie

A year ago, the department forecast iron ore exports for 2020-21 would reach $103 billion. In March this was revised up to $136 billion.

Australia ships 53 per cent of the globe’s export trade in iron ore, with more than 90 per cent of that headed to China.

Iron ore will account for 48 per cent of the record $310 billion of commodities expected to be sent overseas this financial year.

The huge lift in the expected value of iron ore exports is almost solely due to higher prices as China’s demand for the commodity soars in the wake of the coronavirus pandemic. A year ago, the Industry Department was expecting iron ore to average $US77 a tonne in 2020-21 but it now expects the price to average $US137 a tonne, up 78 per cent.

In March, the department forecast commodity exports to hit $296 billion. The upward revision to $310 billion is largely due to iron ore, with much smaller increases in exports of liquefied natural gas, thermal coal, nickel, zinc and aluminium.

Exports of metallurgical coal, uranium and lithium have been marginally reduced.

The situation is expected to improve further through the coming financial year, with total exports tipped to rise to $334 billion before edging down to $304 billion in 2022-23.

LNG exports are tipped to surge in 2021-22 to $49 billion.Credit:Michele Mossop

The department said strong growth out of the United States and China were helping boost the global economy, which was feeding into demand for key Australian commodities.

“Export earnings are forecast to continue to rise in 2021-22, up a further 7.7 per cent to $334 billion, propelled by ongoing dwelling and infrastructure spending in many countries,” it said.

Iron ore exports are forecast to fall to $137 billion next year, but this is expected to be offset by a $17 billion jump in the value of sales of LNG, an $8 billion bump in metallurgical coal exports and a 50 per cent lift in lithium sales.

Resources Minister Keith Pitt said the figures underlined the importance of the resources sector to the broader economy.

“Australia’s energy and resources sector has remained a safe and reliable supplier to domestic and global markets throughout the pandemic, helping to underpin economic growth and overcome the challenging trade conditions of the past year,” he said.

“The sector is poised to take advantage of the global post-COVID recovery and capture opportunities from strong demand and higher prices across a range commodities.”

Data from the Australian Bureau of Statistics shows the high prices for key commodities is feeding into a jobs boom across the sector.

The number of people working in mining hit a record high of 279,000 in May, up 18 per cent over the past 12 months. Twenty-thousand jobs have been created in Queensland over the past 12 months while another 15,000 have been created in Western Australia.

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