Two major resource exports drove Australia’s good fortune in 2022. Iron ore and coal accounted for over 25% of the country’s total shipments, providing a combined $200 billion-plus export value throughout the year.
However, 2022 also saw a shift in the pecking order, as coal took over the number one spot, becoming Australia’s most valuable export ($132b) after Iron Ore’s long reign. In a year when China continued to buycott Australian thermal and metallurgical coal, this might come as a surprise.
But a global energy shortage – caused by Russia’s invasion of Ukraine – saw demand for coal in Asian nations and India go through the roof.
A demand that Australian coal miners were happy to meet. China’s hunger for Iron Ore also cooled in 2022, but not by choice.
The populous nation saw a significant dip in infrastructure projects, easing demand for steel and its Fe building blocks.
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Will Iron Ore ride the dragon’s tail in 2023?
Early in 2023, however, there are positive signs that China’s demand for steel could be rising.
Reaching a six-month price high of over $US125/t in January, Australian Iron ore looks to be back on the menu after its hiatus.
While still a long way from its high of over $US200/t in 2021, it’s also much better than October’s figure of just $US80/t.
China absorbs almost 70% of the world’s iron ore exports alone.
So with prices in a wild fluctuation, what’s the outlook for Australian Iron Ore exports in 2023? In a word, optimistic.
Analysts predict that by Q2, and barring a return to full-scale Covid lockdowns, Chinese steelmakers could be, once again, firing on all cylinders.
As China continues to reopen its economy post-pandemic, the forecast for Fe pricing is positive, particularly in the latter half of the year.
However, there are still apparent risks to consider.
Will Australia’s coal boom continue?
Despite China’s cold shoulder to Aussie coal, the energy and steelmaking resource has boomed in the last 12 months, becoming Australia’s most valuable export bar none.
Far from sitting back and waiting for Chinese interest to re-appear, coal miners have found new markets for their material, forging strong relationships in the process.
And now that our biggest trading partner is back at the table, more supply could be needed to go around.
The ongoing energy crisis has also pushed coal prices to record highs.
Throughout 2022, the price of coal exceeded $US400/tonne and is currently back on track sitting at $US380/tonne in January 2023.
While the short-term outlook for coal exports is promising, the global energy transition means its future as an energy commodity and steel-making material is limited.
As a cleaner, greener power sources are identified and applied at scale, coal’s role will diminish to use cases where no other options are available.
Summary
Australia’s two most significant exports, coal and iron ore remain in solid demand, fueling the country’s economy.
But export reliance doesn’t just hinge on China anymore, as a global energy crunch has seen new customers scramble for Aussie resources, particularly coal.
In China, still Australia’s largest export partner by far, Covid lockdowns are easing, and demand for steel to build infrastructure is again on the rise.
This requires not only coal but also significant amounts of iron ore for smelting.
Through this lens, Australian iron ore exports are predicted to rise in 2023, along with the price per tonne.
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References:
https://www.australianresourcesandinvestment.com.au/2023/01/15/the-iron-ore-outlook-for-2023/.
https://www.australianmining.com.au/news/coal-becomes-australias-top-export-earner/.
https://www.australianmining.com.au/news/what-does-the-end-of-chinas-coal-ban-mean-for-australia/.
https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook45p/AustraliaTrade.
