Thermal coal prices forecast to drop 25% and metallurgical coal prices 23% as value of iron ore exports also falls

Value of Australian coal exports tipped to decline sharply over next 18 months

The value of Australia’s coal exports is forecast to decline sharply over the next 18 months as thermal coal prices drop 25% and metallurgical coal prices fall 23%.

The decline in the spot price of both products will see their combined export value fall from $60.8bn in 2018-19 to $49.9bn in 2019-20, a deterioration of 18%.

At the same time, the value of iron ore exports will also decline, but not by as much. Iron ore export earnings are forecast to decline from $60.4bn in 2018-19 to $55.7bn in 2019-20, a decline of 7.8%.

It means iron ore will remain Australia’s biggest export earner in 2019-20, with the factors supporting higher coal export values briefly this year disappearing.

The figures raise questions about the claim made by the resources minister, Matthew Canavan, in June that “market conditions are right” for Queensland’s Galilee basin to start digging up large amounts of coal.

The Department of Industry, Innovation and Science released the September quarter figures for Australia’s resource and energy exports on Tuesday.

The figures largely confirm the projections for global commodity prices and volumes contained in the June quarter projections, with slight revisions.

When the June quarter projections were released, they showed the export value of Australia’s coal briefly rising above the export value of iron ore in 2018-19, before falling below iron again in 2019-20.

A story in the Australian zeroed in on that brief phenomenon and characterised it as coal regaining its spot “as the nation’s biggest export earner”.

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The story then quoted Canavan as saying: “At current prices we’d be mad not to open up the Galilee basin as soon as possible.

“Opening up the Galilee would generate 16,000 direct mining jobs and tens of billions in taxes. The market conditions are right for this to happen so Labor should stop pandering to the Greens and get these jobs going.”

The shadow energy minister, Mark Butler, said the figures from the June report were being misrepresented.

“Minister Canavan and [the then prime minister, Malcolm Turnbull] may think it’s their job to present this as a booming market but the Australian people, especially those living and working in thermal coal communities, deserve to be treated with respect and intelligence,” Butler said.

In the September quarter figures, the value of Australia’s liquefied natural gas exports is forecast to increase from $30.8bn in 2017-18 to $42.4 bn in 2019-20, driven by higher volumes and higher prices.

In fact, LNG is forecast to overtake metallurgical coal as Australia’s second highest resource export by value in 2018-19.

LNG contract prices – at which most Australian LNG is sold – are projected to increase, in line with oil prices. The average price of Australian LNG is expected to increase to $10.5 a gigajoule in 2019–20, up from $8.1 a gigajoule in 2016–17.

The completion of the final three Australian LNG projects by the end of 2018 will underpin the strong growth in export volumes and bring total export capacity to 88 million tonnes. LNG exports are projected to reach 77 million tonnes in 2019–20.

Australia’s resource and energy export earnings are forecast to reach a record $252bn in 2018-19, up from the previous record of $226bn in 2017-18. Export earnings are then forecast to edge back to $238bn in 2019-20, as bulk commodity prices fall modestly.