Resources hit paydirt

AUSTRALIA’S earnings from resources exports will hit a record $211 billion this financial year, according to a new report from the nation’s top official commodity price forecaster.

Buoyant iron ore and coal prices and surging gas exports are set the deliver the historic payday, the latest Resources and Energy Quarterly report says.

The report is due to be for- mally released today by the Department of Industry, Innovation and Science.

It marks a turnaround from the department’s June report, which predicted resource and energy export earnings had reached their high water mark in the 2017 financial year.

The department has now lifted its 2018 financial year forecast by $4.1 billion, or 2 per cent, to reflect higher-than-expected prices for metallurgical coal, alumina and gold.

But it warns earnings are likely to peak this year and ease to $201 billion next financial year – some $9 billion less than it forecast three months ago – as the nation’s iron ore production tops out and liquefied natural gas exporters get less for their gas.

“The high prices that have bolstered Australia’s resources and energy export earnings in 2016-17 and so far in 2017-18 are not expected to last,” the department’s chief economist, Mark Cully, says. “The combination of slowing demand growth from China’s steel sector and increased global supplies are expected to lower export unit values in 2018-19.”

Morningstar yesterday warned key mining stocks are overvalued because investors are “too optimistic” about ongoing demand for commodities.

Analyst Matthew Hodge said the share prices of both BHP and Rio Tinto had run ahead of themselves.

Investors were failing to recognise that the run of strongerthan-expected commodity prices was only a cyclical upturn driven by temporary Chinese stimulus, Mr Hodge said.

“Long term, structural headwinds remain and China’s steel consumption is likely to decline in the next decade,” he wrote in a research note.

Earnings from resource and energy exports surged 27 per cent to $204 billion for the year to June, the department’s latest resources and energy update shows.

Iron ore remained the nation’s single biggest export item, generating $62.9 billion in earnings, followed by coking coal with $35 billion and LNG with $22.3 billion.

The result was far higher than the $176 billion the department forecast a year ago for the 2017 financial year but below the $215 billion it flagged in its March update.