Australia Sees Higher Iron Ore Earnings on China-Fueled Boom

(Bloomberg) —

Australia upgraded its forecast for earnings from mining and energy exports in the 2021 financial year as booming iron ore prices boost the coffers of the world’s top producer.

Export sales are seen at A$279 billion ($212 billion) in the year to June 30, 2021, up about 9% on the previous forecast in September, the government’s Department of Industry, Science, Energy and Resources said in a quarterly update. That’s still down from a record A$291 billion in fiscal 2020.

Australian iron ore earnings are on track for an all-time high in fiscal 2021, with the department raising its forecast by 27% to A$123 billion on strong demand from China and ongoing supply disruptions in Brazil. Prices of the steelmaking raw material are expected to average $100 a ton over calendar 2021, up from the $85.50 projected in the September quarter.

“With global economic activity rebounding, the demand for resources and energy is steadily rising, running down inventories built up at the height of Covid-19 lockdowns,” the report said.

Soaring iron ore prices have helped to support Australia’s finances through the pandemic, while the government’s recent conservative assumption that they will decline toward $55 by the end of the third quarter next year sets it up for a potential budget windfall. In contrast, analysts have been marking up their forecasts, with Citigroup Inc (NYSE:C). expecting the market to hold above $100 per ton through 2021.

The department lowered its forecast for coal exports, saying that reports of Chinese import restrictions were hurting producer sentiment. The government was focused on pursuing new export markets, Resource Minister Keith Pitt said in a statement, as the country seeks to reduce its reliance on demand from China amid heightened diplomatic tensions between Canberra and Beijing.

(Adds minister comment in paragraph six)

©2020 Bloomberg L.P.