Friday, June 04, 2010

Mining export earnings are beginning to roll (whatever the industry says)

Claims that Australia is uncompetitive for mining have come at an inconvenient time.

Trade figures for April released as Xstrata shelved two of its Queensland mining projects show a dramatic jump in mining earnings - with more in store.

With imports steady Australia's export earnings jumped 11 per cent in April led by a 32 per cent jump in earnings from iron ore and a 35 per cent jump in earnings from coal.

"This is just the beginning,' said TD Securities strategist Roland Randall. "We expect significant trade surpluses over the next twelve months, boosting economic growth and accelerating inflation.

The 32 per cent jump in iron ore earnings was made up of a 29 per cent boost in prices and a 2 per cent increase in volumes. The recorded coal export price climbed 7 per cent as volumes jumped 26 per cent.

The surging prices are only the first installment... of dramatic increases that began flowing from April.

The new iron ore contacts are around 80 per cent higher and the new coal prices 35 to 55 per cent higher.

Many of the new contracts run for just three months instead of the previous twelve leaving scope for further acceleration.

On Tuesday this week Japanese steelmakers granted BHP a further increase of 12.5 per cent to apply from July.

"The massive increases we have had have yet to be passed on to all miners," said Westpac economist Anthony Thompson. "To the extent other miners eventually achieve matching price leaps and have them backdated, the iron ore figures and the trade surplus will face upward revisions."

The Commonwealth Bank is forecasting a return to record-high export prices within months.

"We think the terms of trade will go back to their previous peak early next year and may even go through it," said Commonwealth Bank economist Michael Workman. "Our commodities team are forecasting further increases in the September quarter."

The trade figures mark a dramatic change from those released just one day before in the National Accounts.

Wednesday's accounts painted a bleak picture for exports and dealt only with developments to March. Thursday's trade figures for April push Australia's balance of trade into surplus for the first time in a year and herald the long-anticipated resumption of Australia's commodities boom.

Published in today's SMH and Age 

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