Australia's export of energy transition metals is dominated by thermal coal

On July 4th, foreign media reported that the value of Australia's new energy metal exports is expected to exceed that of thermal coal exports. Steam coal is a highly polluting fuel and has always been the main fuel for power generation in most parts of Asia.

According to the latest quarterly report from the Australian government's Department of Industry, Science, and Resources, metal exports for energy transformation are expected to remain above AUD 40 billion ($26.6 billion) in the fiscal year starting from July 1st.

In contrast, according to a report released on Monday, it is expected that thermal coal exports will decrease to AUD 38 billion in the 2023-24 fiscal year, down from AUD 64 billion the previous year.

Australia is the world's largest exporter of lithium, a key battery metal, and ranks fourth in copper exports.

China is also the world's largest producer of Bauxite (the key raw material of aluminum), the world's third largest producer of manganese and the fifth largest producer of nickel.

Australia is the world's second largest exporter of thermal coal after Indonesia and also the largest exporter of coking coal. Coking coal is mainly used for steelmaking.

It is also the world's largest exporter of iron ore, the largest Balance of trade of gold, and the largest shipper of liquefied natural gas (LNG) with the United States and Qatar.

Although the export of battery metal is expected to exceed that of thermal coal in this fiscal year, the driving factor is not an increase in metal shipments or a decrease in coal exports.

On the contrary, the main factor is the expected decrease in the price of seaborne thermal coal, as the price surge caused by Russia's invasion of Ukraine gradually subsides.

The government predicts that the export volume of thermal coal will actually increase to 201 million tons from 2023 to 2024, higher than the 178 million tons from 2022 to 23.

However, the increase in production was offset by a decrease in the price of the benchmark Newcastle 6000 kcal per kilogram grade, with an average price of $158 per ton in 2023-24, almost halving from $303 in 2022-23.

Soft lithium

It is expected that the price of lithium will also decrease, and the government expects exports to reach AUD 18 billion in 2023-24, lower than AUD 19 billion the previous year, although shipments are expected to increase from 3.25 million tons to 3.42 million tons.

It is expected that copper exports will increase from the previous 12 billion Australian dollars to 13 billion Australian dollars in 2023-24, and copper exports are expected to increase from 836000 tons to 865000 tons.

It is expected that both nickel and zinc exports will increase this year, but as prices continue to weaken, their value may remain largely unchanged.

Iron ore is Australia's largest commodity export, and the main raw material for steel is not classified as a new energy metal, although steel is an important component of many wind turbines and transmission networks required for energy transformation.

Similar to other commodities, the decline in iron ore prices is expected to reduce export revenue. It is expected that iron ore export revenue for 2023-24 will be AUD 110 billion, down from AUD 123 billion last year, although the expected export volume will increase from 892 million tons to 918 million tons.

LNG exports are expected to decrease from AUD92 billion to AUD68 billion in 2023-24, with exports slightly decreasing from 82 million tons in 2022-23 to 81 million tons.

Overall, the total revenue from resource exports for 2023-24 is expected to be AUD 389.7 billion, lower than the record high of AUD 459.5 billion in 2022-23.

The main conclusion of this report is that the impact of the Ukrainian war on energy commodities has subsided, and prices are expected to be closer to historical norms.

But perhaps more importantly, the Australian government does not expect a significant increase in export revenue and volume of major energy transition metals.

On the contrary, it is expected that the growth of trading volume will be gradual, prices will remain basically stable, and risks tend to decline.