Australia could be on its way towards becoming the world’s largest gold producer by the mid-2020s, according to forecasts in the Australian Department of Industry, Innovation and Science’s latest Resources and Energy Quarterly report.

Notwithstanding the slight dip since September, high Australian gold prices have been the driver for local miners to re-open previously closed mines.

Already, our exports are expected to hit a record of $28 billion in the 2019-20 financial year as the global economic slowdown, political uncertainty in the US and geopolitical risks conspire to send investors racing to their favourite hedge against risks.

This also takes gold earnings above thermal coal as the fourth largest export commodity.

Australian gold production is forecast to rise 4.9 per cent in the current financial year to 337 tonnes and a further 2.7 per cent in the following year.


Everything else

More broadly, resources exports are expected to hit a record of $280 billion in the current financial year, up from $279 billion in the previous year.

However, the expected rise in the Australian dollar and weaker commodity prices could send earnings for the 2020-21 financial year spiralling down 9 per cent to $256 billion.

Iron ore prices are forecast to fall from the average of $US80 a tonne in 2019 to $US60 a tonne by 2021 as global supply recovers from the fallout of the Vale tailings dam collapse in Brazil at the beginning of this year and Chinese steel output eases.

Earnings are expected to increase from $77 billion in 2018–19 to $84 billion in 2019-20 before sliding to $66 billion in 2020-21 as seaborne prices decline.

However, the recent phase one trade deal between the US and China could alleviate some of the negative sentiment on the global economy and could potentially result in a steady recovery in global industrial production growth in 2020.

Meanwhile, thermal coal prices are under pressure from rising supply and softer demand as the low spot liquefied natural gas (LNG) price encouraged some switching from coal to gas – primarily in Europe.

The Newcastle benchmark thermal coal spot price is forecast to drift from an estimated average of $US74 a tonne in 2019 to $US72 a tonne in 2021, while Australian exports are expected to grow from 210 million tonnes in the 2018-19 financial year to 214 million tonnes in 2020-21.

Metallurgical coal prices are also expected to be affected by rising supply coupled with softer demand.

While Australian export volumes are forecast to grow from 184 million tonnes in 2018-19 to 197 million tonnes by 2020-21 due to restarts and new capacity in Queensland’s Bowen Basin, low prices are expected to drive a reduction in earnings to $35 billion in 2019-20 and 2020-21.

Meanwhile, LNG export prices are expected to ease in 2019-20 and 2020-21 due to a decline in oil-linked contract prices under which most Australian LNG is sold.

Export earnings are forecast to slip from $50 billion in 2018-19 to $49 billion in 2019-20 before falling again to $47 billion in 2020-21 despite an expected increase in volumes from 75 million tonnes to 81 million tonnes.

This is due to the arrival of the long-anticipated overcapacity in global LNG markets as projects in the US, Australia and Russia ramp up operations while growth in Chinese LNG demand has slowed. Likewise Japanese and South Korean LNG demand have also declined.

Oil prices have stabilised with the benchmark Brent crude expected to hold above the $US60 per barrel mark.

While Australian oil production continues to decline, its condensate and liquefied petroleum gases export volumes are rising.

As a result, earnings from crude, condensate and LPG exports are forecast to continue their upward trend, rising from $9.1 billion in 2018-19 to $11 billion in 2019-20, before falling marginally to $10 billion in 2020-21.