Resources
and Energy
Quarterly
December Quarter 2013
Acknowledgements
Individual commodity outlooks have identified BREE authors. Document design and production was undertaken by Tom Shael.
BREE 2013, Resources and Energy Quarterly, December Quarter 2013, BREE, Canberra, December 2013.
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ISSN 1839-499X (Print)
ISSN 1839-5007 (Online)
Vol. 3, no. 2
Postal address:
Bureau of Resources and Energy Economics
GPO Box 1564
Canberra ACT 2601 Australia
Email:
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Foreword
The Resources and Energy Quarterly provides data on the performance of Australia’s resources
and energy sectors and analysis of key commodity markets. This release of the Resources and
Energy Quarterly contains an update of BREE’s short-term commodity forecasts and overview of
key commodity market issues.
Domestic production for most key commodities is forecast to increase in 2013–14 as Australia
begins the transition from the investment phase to the production phase of the mining boom. As
Australia is a relatively small consumer of these products, this will translate to higher export
volumes. In 2013–14, export earnings for resource and energy commodities are forecast to
increase by 17 per cent, supported by robust growth in export volumes and a lower Australian dollar
exchange rate
Bruce Wilson
Executive Director
Bureau of Resources and Energy Economics
Macroeconomic outlook
The global economy
The world economy is estimated to have grown by 2.9 per cent in 2013, down from 3.2 per cent in
2012. In 2013 lower economic growth rates in emerging economies more than offset the small
rebounds in a number of OECD economies. In 2014, world GDP growth is forecast to rebound to
3.5 per cent, underpinned by improving growth rates in both developed and emerging economies
(see Figure 1).
Figure 1: World economic growth
Please refer to page 2 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Economic growth in OECD economies is estimated to be 1.3 per cent in 2013, down from 1.6 per
cent in 2012 (see Table 1). Developed economies continue to undertake a mix of fiscal and
structural reforms which are only just beginning to support a return to economic growth. However,
performance continues to be mixed. Economies that have undertaken aggressive expansions to
their monetary base, particularly the US and Japan, have had some success in stimulating
economic growth in 2013. In these economies key indicators for construction, domestic
consumption and exports have reflected improving economic activity through 2013 providing some
optimism for stronger economic conditions in the short term. As a result, economic growth in
developed economies is forecast to increase to 2.2 per cent in 2014. However, markets’ responses
to the potential tapering of expansionary monetary policies, particularly the US’s QE3 program, and
lingering public debt issues are potential downside risks to this forecast pick -up in economic
activity.
Table 1:
Key macroeconomic assumptions for the world
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Real GDP growth in emerging economies is estimated to have slowed from 4.9 per cent in 2012 to
4.5 per cent in 2013. This decline is primarily the result of slower growth in exports, particularly to
developed economies, and lower capital expenditure growth. In 2014, real GDP growth in emerging
economies is forecast to rebound to 5 per cent.
Outlook for key economies
The US
In 2013 a range of indicators have shown economic conditions in the US are improving. Real GDP
is estimated to have grown 2 per cent in 2013, supported by increased construction activity and
business investment that have been stimulated by the expansionary monetary policy settings of
QE3. Economic growth in 2013 may also have been slightly higher but for the fall in public
expenditure associated with the October 2013 Government shut down in r esponse to the delayed
approval of the debt ceiling.
US economic growth in 2014 is forecast to increase to 2.5 per cent but the two principle underlying
economic issues from 2013, the federal budget deficit and the timing of the QE3 taper, will continue
to be key risks affecting growth. The 2.5 per cent forecast growth in real GDP is based on the
expectation that further increases to the debt ceiling are passed. While the budget deficit itself is
not seen as a risk, in the short term, the politics surrounding the debt ceiling may limit public
expenditure in 2014 and potentially lead to another impasse that forces another closure of non essential elements of the public service.
There is considerable uncertainty as to when QE3 will be tapered. While markets a lready appear to
be pricing in tapering to be announced in December 2013, it is not expected to occur until after
Government debt ceiling issues are resolved, the new Chair of the Federal Reserve takes up the
position and economic indicator targets are reached. While US economic conditions have improved,
the economic indicator targets referred to by the Federal Open Market Committee following its
October 2013 decision to continue QE3 unabated (unemployment of 6.5 per cent and inflation at 2
per cent) suggest that there is room for it to continue into 2014. The forecast 2.5 per cent growth in
real GDP and USD exchange rate in this report are based on the expectation that QE3 tapering is
announced in the second quarter of 2014.
China
Real GDP growth in China is estimated at 7.7 per cent for 2013, broadly unchanged from 2012.
Investment has continued to be the main driver of economic growth with fiscal spending packages,
particularly infrastructure projects, the Government’s preferred method of delivering its ta rgeted
economic growth rates. The 2013 Third Party Plenum in November has again given indications of
an economic reform agenda that has markets playing a greater role and provides social reforms to
support increasing urbanisation. However, in the short term resources-intensive capital investment
is expected to continue as the principal driver of economic growth to enable the achievement of
economic growth targets. In 2014, real GDP is forecast to increase by around 7.6 per cent reflecting
the modest wind down of some stimulus measures.
Japan
Japan’s economic growth is estimated at around 1.8 per cent in 2013, fuelled by the massive
expansion of its monetary base that has devalued the yen by around 20 per cent over the past
twelve months. Further monetary expansion is expected in 2014; however, the looming rise in
Japan’s consumption tax rate is likely to moderate its effects on economic growth. In 2014, real
GDP in Japan is forecast to increase by 1.6 per cent.
Economic outlook for Australia
The value of the Australian dollar remained high by historical standards through 2013, despite low
interest rates, and continues to affect the international competitiveness of a number of Australian
industries. In the September quarter 2013 the Australian economy grew 0.6 per cent quarter on
quarter and 2.3 per cent year on year. Real GDP growth is forecast to rebound in the remainder of
2013–14 and total 2.7 per cent for the full year (see Table 2). Domestic interest rates are expected
to remain at low levels in 2013–14 and stimulate a moderate increase in residential construction
and, to a lesser extent, private sector investment. Mining exports are also forecast to grow in 2013–
14 though this is likely to be offset by declining activity in other key industries, particularly
manufacturing. In aggregate, Australia’s real GDP is forecast to grow at a sub -trend rate in 2013–
14.
Although some economic and business confidence indicators suggest improving domestic
conditions, the RBA have indicated further interest rate cuts are possible in 2014 if the Australian
dollar exchange rate remains ‘uncomfortably high’. The Australian dollar has depreciated against
the US dollar throughout 2013, from a high of US105c in January to around US90c in December
2013. For the financial year as a whole, the US-Australian dollar exchange rate is forecast to
average around US91c, 12 per cent lower than 2012–13. The value of the Australian dollar is
expected to depreciate modestly from its current level, either in response to the announced tapering
of the US QE3 program or through the actions of the RBA.
Table 2:
Key macroeconomic assumptions for Australia
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Australian resources and energy commodities, production and exports
Australia’s energy and mineral commodity export earnings decreased by 8.6 per cent in 2012 –13,
relative to 2011–12, to total $176 billion. Mineral commodities export earnings accounted for 61 per
cent, or $107 billion, of this total and energy commodities export earnings accounted for 39 per
cent, or $69 billion.
In 2013–14, total export earnings for mineral and energy commodities are forecast to increase 17
per cent, supported by robust growth in both mineral and energy commodity export volumes and a
lower Australian dollar exchange rate (see Figure 2). Mineral commodity export earnings are
forecast to increase 22 per cent to total $130.2 billion, mainly due to substantial growth in iron ore
export volumes. Export earnings from energy commodities are forecast to increase 9.1 per cent to
total $75.3 billion, underpinned by higher earnings for LNG and metallurgical coal.
Figure 2: Australia’s minerals and energy export earnings
Please refer to page 5 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Table 3:
Australia’s resources and energy commodity exports, selected commodities
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Table 4:
Outlook for Australia’s resources and energy commodities
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Australia's major resources and energy commodity exports
Please refer to page 7 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Energy outlook
Oil
Pam Pham
Oil prices
Oil prices remained high over the September quarter 2013, supported by improved economic
conditions in the US, China and the European Union. The West Texas Intermediate (WTI) price
averaged around US$106 a barrel while the Brent price averaged around US$110 a barrel. In
October and November, oil prices fell in response to increased supply and possible easing of
geopolitical tensions in Iran. For 2013 as a whole, the average WTI price is estimated to average
US$98 a barrel and the Brent price is estimated to average US$109 a barrel (see Figure 1).
Prices are forecast to moderate in 2014, supported by higher oil production in the US, Brazil, Iraq
and Saudi Arabia. A small decline in oil consumption in OECD economies will further contribute to
lower oil prices in 2014. The WTI price is forecast to average US$97 a barrel while the Brent price
is forecast to average US$105 a barrel in 2014.
Figure 1: Annual WTI and Brent oil prices
Please refer to page 8 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
World oil consumption
World oil consumption is estimated to have increased by 1.2 per cent in 2013 to average 91 million
barrels a day. Strong consumption growth in non-OECD economies has offset lower demand in the
OECD.
In 2013, oil consumption in non-OECD economies is estimated to have increased by 2.9 per cent to
average 45.2 million barrels a day, driven by increased demand for transport fuel in China. Lower
oil consumption in Japan’s power generation sector because of a shift toward coal as a cheaper
source for power generation and ongoing structural contraction in OECD-European oil demand
have contributed to oil consumption in OECD economies declining by an estimated 0.3 per cent to
an average of 45.9 million barrels a day in 2013.
In 2014, world oil consumption is forecast to increase by 1.3 per cent to 92.2 million barrels a day.
Similar to 2013, non-OECD consumption will be the major driver of growth in world oil consumption,
and is expected to exceed OECD consumption for the first time (Figure 2).
Figure 2: Oil consumption in OECD and non-OECD economies
Please refer to page 9 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Continued strong demand growth in China’s transport sector, and increasing industrial activities and
power sector demand in Saudi Arabia will support a 3.1 per cent increase in oil consumption in nonOECD economies in 2014. In 2014 oil consumption in non-OECD economies is forecast to average
46.6 million barrels a day.
Japan’s additional coal-fired generation capacity due online in late 2013 will contribute further to a
0.5 per cent decrease in OECD oil consumption in 2014 to an average of 45.7 million barrels a day.
Lower oil consumption in Japan will more than offset a moderate increase in US oil consumption.
World oil production
In 2013, world oil production is estimated to increase by 0.3 per cent to 91.4 million barrels a day.
Increased oil production in non-OPEC countries offset lower OPEC oil output (Figure 3).
In 2013, oil production in non-OPEC countries is estimated to have increased by 2.3 per cent to
54.6 million barrels a day, driven by growth in unconventional supplies —mainly US light tight oil and
Canadian oil sands. Iran’s falling oil exports under the ongoing international sanctions and supply
disruptions associated with political unrest in Libya resulted in an estimated 2.3 per cent decline in
OPEC production to 36.7 million barrels a day in 2013.
In 2014, world oil production is forecast to increase by 2.7 per cent to 93.9 million barrels a day.
Continued growth in unconventional supplies in non-OPEC countries and new supplies from OPEC
will largely drive the production growth.
In 2014 oil production in non-OPEC countries is forecast to increase by 2.8 per cent to 56.2 million
barrels a day, underpinned by increased production from the US and Bra zil. The focus on tight oil
drilling will continue to contribute to US production growth. A number of projects commissioned
during in the last quarter of 2013 will support strong growth in Brazil’s oil production in 2014.
Higher production from Saudi Arabia and Iraq will contribute to OPEC oil production rebounding to
an average of 37.6 million barrels a day in 2014, up 2.5 per cent from 2013. This includes the
commissioning of the Manifa offshore field in Saudi Arabia; and new supply from the Majnoon and
Gharaf fields together with a recovery of production in Iraq.
Figure 3: World oil production in OPEC and non-OPEC economies
Please refer to page 10 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Australian production and exports
In the September quarter 2013, the Montara-Skua and Fletcher-Finucane oil projects added an
additional 30 thousand barrels a day to Australia’s oil production in the quarter. The gain in
production from these new fields more than offsets the production decrease from maturing fields.
However, the shut-in for maintenance of the Mutineer Exeter and Vincent projects for most of the
September quarter will dampen growth for oil production for 2013–14 as a whole. In 2013–14
Australia’s crude oil and condensate production is forecast to increase by 2 per cent to 374 million
barrels a day. The expected commencement of the Coniston project in the first half of 2014 after a
number of delays will also underpin the production increase.
Crude oil and condensate exports are forecast to increase by 2.4 per cent in 2013–14, relative to
2012–13, to 331 thousand barrels a day. Increased export volume and the effect of an assumed
depreciation of the Australian dollar will more than offset forecast lower prices in 2013 –14. As a
result, Australia’s earnings from crude oil and condensate exports are forecast to increase robustly
by 14 per cent to $14.2 billion.
Figure 4: Australian crude oil and condensate exports
Please refer to page 11 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Table 1:
Oil outlook
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Gas
Tom Willcock
Prices
Domestic gas prices continued to present a mixed picture in the September quarter. In the Western
market, Apache and Woodside reported lower prices for contracted domestic gas supply (in the mid
$4 per gigajoule range) compared to the previous quarter. The three Short Term Trading Markets in
Brisbane, Sydney and Adelaide also reported lower prices (down to between $5.6 and $3.6 per
gigajoule in the September quarter). Likewise, the Victorian Wholesale market price fell to $3.6 over
the same time period. Short-term price falls in the Eastern market reflect lower seasonal demand
(due to a warmer than expected winter) and weaker gas powered generation demand (which has
fallen by 4 per cent in the year to date as hydro and renewables have increased their generation
share). Despite these recent falls, reports of new contracts being signed at prices around $8 to $10
per gigajoule (well above historic averages) continue. Higher new contract prices, which are
expected to start in coming years, generally reflect uncertainty in the Eastern market and a
perception of impending supply tightness as LNG projects in Gladstone begin operations (in 2014 –
15).
Asian LNG prices have also fallen over the September quarter, reflecting lower oil prices through
the middle of the year (LNG contract prices are frequently linked to the oil price, but tend to lag
behind it). Average landed prices in Japan fell from around US$17 per gigajoule in July to around
US$16 per gigajoule in September. Reflecting the lower Japanese LNG price, Woodside reported
lower per unit revenue from Pluto LNG (which sells the majority of its gas under contract to Japan)
in the September quarter compared to the July quarter. North West Shelf (NWS) LNG export unit
values went up, however, due to an increase in higher-priced spot market sales over the same
period.
Asian spot prices are expected to continue to rise due to strong winter demand from North Asian
countries. Month-ahead spot deliveries into North Asia are being quoted at around US$18 per
gigajoule for December, while prices for January and February are even higher at US$19 per
gigajoule and above. Contract prices, on the other hand, are expected to moderate in 2014 along
with oil prices; the majority of Australian LNG is traded under contract.
Global LNG developments
2013 saw a continuation of the trend for growing LNG demand in the Asia-Pacific region and flat or
falling growth in European countries. Japanese demand remains well above long-term levels due to
the shutdown of the nation’s nuclear reactors. Similarly, nuclear outages in the Republic of Korea
have pushed LNG demand up in recent months. Chinese LNG buyers PetroChina and CNOOC are
also reported to be seeking additional LNG shipments to meet growing demand.
On the supply side, most recent developments in global liquefaction capacity have been in the AsiaPacific. Of projects currently under construction, the vast majority of capacity, and more than two
thirds of current global LNG investment, is in Australia. Projects comprising 41 million tonnes per
annum of LNG capacity (Queensland Curtis, Gladstone, Australia Pacific and Gorgon LNG) are
expected in late 2014 and 2015. There are not expected to be any new liquefaction projects
commencing in the Asia-Pacific over the forecast period (other projects such as PNG LNG and
Sulawesi LNG are expected in late 2014 and 2015, respectively). This will contribute to a tight
global market and support higher spot prices, particularly in Asia, in 2013 -14. Beyond this,
increasing supply from the United States, where a number of prospective LNG projects ha ve
recently received export approval, is expected to influence the market outlook.
Australian production
Australian gas production was around 63.0 billion cubic metres in 2012–13, a 13 per cent increase
on 2011–12 (Table 1). The start-up of Pluto LNG in April 2012 resulted in around 5 billion cubic
metres of additional gas production in 2012–13. Production at the NWS project was around 1 billion
cubic metres higher than the previous year, driven by higher LNG and domestic demand.
Production in the September quarter was up by 6 per cent on the previous quarter, mainly due to
increased Carnarvon basin production. Higher production at the NWS project continued to be
supported by increased domestic and LNG demand. First gas was delivered from the Macedo n gas
facility, also in the Carnarvon, in August. With a capacity of around 1.9 billion cubic metres per
annum and drawing on extensive reserves in the Carnarvon basin, BHP anticipates this facility will
meet around 20 per cent of Western domestic demand when operating at full capacity.
Despite strong results in the September quarter, production growth in 2013 –14 is forecast to slow to
around 2 per cent. This mainly reflects lower expectations for domestic gas demand and limited
additional supply to the Eastern market, as well as limited opportunities for further gains at LNG
operations. Most of this growth is forecast to come from Western market production, particularly
Macedon. LNG projects in Queensland are not scheduled to commence operations until late 2014
and early 2015, beyond the forecast period.
Exports
LNG exports were 23.9 million tonnes in 2012–13, a 4.6 million tonne or 24 per cent increase on
2011–12. This increase largely resulted from a full year of operation at Pluto LNG, combined with
increased production at both NWS and Darwin LNG. Strong LNG production has continued in the
September quarter with exports up by 12 per cent on the previous quarter. This was due to higher
production from Darwin and NWS LNG as a result of increased operating ef ficiency and
maintenance completion, respectively. These increases offset a fall from Pluto LNG which operated
slightly below capacity due to an unplanned outage.
Exports for 2013–14 are forecast to remain at similar levels, due to ongoing maintenance at P luto
LNG and the absence of any new export capacity beginning operations (Table 1 and Figure 1).
However, if Pluto returns to full production next quarter, and strong demand drives higher spot
market volumes from NWS, total exports may be slightly higher than in 2012–13.
Figure 1: Australia’s LNG exports
Please refer to page 15 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Despite lower prices in 2012–13, export value increased significantly from 2011–12, to $13.7 billion.
This was due to significantly higher volumes (around 4.6 million more tonnes were shipped in
2012–13 than in 2011–12) and the depreciating Australian dollar. Export values are forecast to
increase in 2013–14, mainly due to the lower Australian dollar combined with higher spot market
values during the Northern Hemisphere winter.
Table 1:
Gas outlook
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Thermal coal
Kate Penney
Prices
After starting the year at around US$95 a tonne, spot prices for 6000 kilocalorie per kilogram
(kcal/kg) coal net as received free on board Newcastle progressively declined to around US$77 by
the end of September. Prices have since increased to around US$87 a tonne by early December as
a result of seasonal buying by utilities aiming to ensure supplies for the northern winter and through
to Chinese New Year. Benchmark prices for the Japanese Fiscal Year 2013 (JFY, April 2013 to
March 2014) settled at US$95 a tonne. For JFY 2014, the benchmark price is forecast to settle 6
per cent lower at around US$89 a tonne.
The world thermal coal market has become oversupplied as new mine capacity developed over the
past few years has been commissioned at a time when demand growth has moderated in key
consuming regions such as the US. A rapid increase in the trade of low rank Indonesian coal has
contributed to declining coal prices; especially as demand for low calorific value coal, largely in
India, has been weak. This has placed pressure on high-cost producers that are struggling to
remain profitable.
Rather than reducing output in response to declining prices, many high cost producers have
increased production in order to reduce their unit cost. Some of these producer s, largely in
Australia, are locked into fixed take-or-pay contracts for infrastructure services and it has been
more cost effective to increase production than to close. This extra production has placed further
downward pressure on thermal coal prices. Although coal consumption is forecast to grow, the
existing supply overhang is expected to limit the prospect of higher prices in the near and short
term.
Figure 1: JFY thermal coal prices
Please refer to page 16 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
World thermal coal trade
World thermal coal trade is estimated to have increased by 2 per cent to around 1.01 billion tonnes
in 2013. Despite policy changes regarding coal use in response to environmental concerns, the
relatively low cost and reliability of coal will continue to support its use, particularly in emerging
economies. In 2014, world thermal coal trade is forecast to increase by 3 per cent to 1.03 billion
tonnes.
Imports
China
In response to heightened public concern about air quality across China, the Government
implemented a number of policy measures to combat air pollution during 2013. Most of these
policies directly target the use of coal, as it is a major, but not the sole, contributor to deteriorating
air quality.
For example, as one of the measures announced in the State Council’s Airborne Pollution
Prevention and Control Action Plan 2013–17, there will be a ban on the construction of new coalfired electricity generation facilities in key industrial areas—Beijing, Shanghai and Guangzhou. At
the national level, this is not expected to have a material effect on China’s total coal consumption,
particularly in the short term, as there are few new developments under consideration in these
cities. Growth in coal consumption is still expected in inland and western regions, underpinned by
plans to increase their industrial output.
Despite plans to curb coal consumption in the largest cities, China is likely to remain a large coal
consumer and importer, particularly over the short term, underpinned by continued growth in
electricity demand, and the relatively low cost of imported coal. According to the China National
Coal Association, China’s coal consumption is projected to increase at an average annual rate of
over 4 per cent from 3520 million tonnes in 2012 to 4800 million tonnes in 2020.
China’s imports of thermal coal are estimated to have totalled 240 million tonnes in 2013, 10 per
cent higher than in 2012. Imports are forecast to increase by a further 8 per cent in 2014 to 260
million tonnes.
India
After increasing by around 25 per cent in 2012, India’s coal imports are estimated to have grown
more slowly at 6 per cent to 130 million tonnes in 2013 on the back of lower economic activity and a
weak Indian Rupee, which increased the cost of imports. Looking forward, coal will be an important
component of India’s economic development with coal-fired plants accounting for the majority of
new electricity generation capacity being developed under the twelfth Five-Year Plan (2012–17).
India’s coal production growth is not expected to be sufficient to keep pace with growth in new coal fired generation capacity because of difficulties in obtaining land access and approvals. This will
increase India’s reliance on relatively more expensive imported coal. Rising imports have been
placing increased financial pressure on Indian power utilities as they have been limited in their
ability to pass cost increases through to consumers. As a result, some utilities are choosing to keep
capacity idle rather than import coal. In the first half of 2013, coal-fired generation capacity
utilisation was around 64 per cent, down from 68 per cent in the first half of 2012.
In 2014, India’s coal imports are forecast to increase by 4 per cent to 135 million tonnes, supported
by the development of new coal-fired capacity.
Japan
Following the closure of the Ohi nuclear power plant in Fukui in September 2013, Japan’s entire
nuclear fleet has been shut down. The low price of coal, particularly relative to LN G, has made
coal-fired generation an attractive option to manage the lost capacity. Consequently, Japan’s coal fired power generation fleet has been running at close to capacity, limiting the scope to increase
coal imports further. Japan’s thermal coal imports are forecast remain relatively steady in 2014 at
around 129 million tonnes.
In December 2013, TEPCO commissioned its Hitachinaka-2 (1 gigawatt capacity) and Hirono-6 (0.6
gigawatts capacity) plants. In addition, Tohoku Electric restarted its Haramachi plant (2 gigawatts
capacity) after it was damaged in the 2011 earthquake and tsunami. This new capacity will reduce
some of the pressure on coal-fired plants operating at full capacity, and is not expected to add
significantly to Japan’s coal requirements.
The increased use of coal has forced the Japanese Government to reassess its emissions targets.
At the UN Climate Change negotiations held in Warsaw in November, Japan reduced its target to a
3.8 per cent reduction against 2005 levels by 2020, 3 per cent higher than their previous target.
South Korea
As part of its efforts to curb the use of electricity and diversify energy demand, South Korea will
impose a tax of around US$20 a tonne on imported thermal coal from July 2014. It is expected that
this cost increase will be passed on to consumers, following an increase in the electricity tariff in
late November 2013. However, it is not expected to have a major effect on South Korea’s imports in
the short term, which are forecast to increase by 2 per cent to 98 million tonnes in 2014.
Exports
Growth in world thermal coal imports are expected to be met mainly by higher exports from
established coal exporting countries such as Australia, Indonesia and Colombia in 2013 and 2014.
Australia
Australian exports of thermal coal are estimated to have totalled 184 million tonnes in 2013, 8 per
cent higher than 2012, supported by higher production from recently completed expansions. These
include Rio Tinto and Mitsubishi’s Hunter Valley Operations Expansion, BHP Billiton’s Mount Arthur
project and stage 2 of Whitehaven Coal’s Narrabri Coal Project. In 2014, Australia’s exports of
thermal coal are forecast to increase by a further 7 per cent to 196 million tonnes. Production will be
underpinned by higher output at the aforementioned projects as they continue to approach full
capacity and a number of other mines as they increase output to reduce unit costs.
Indonesia
Indonesian producers have also been looking to identify ways to reduce costs rather than reduce
production. Indonesian coal mines are largely open cut, where it is relatively easier to reduce costs
by reducing the waste ratio of each tonne produced. Thermal coal exports from Indonesia are
forecast to increase by 3 per cent in 2014 to 420 million tonnes. Infrastruct ure constraints, the high
cost of transporting coal from inland mines and increased domestic use of coal will slow the rate of
growth in exports from Indonesia.
Colombia
In 2013, Colombian output was affected by labour disputes, environmental accidents and bad
weather. For example, in early 2013 production at the El Cerrejon mine, which accounts for around
45 per cent of Colombia’s exports, was affected as workers went on strike for more than one month.
The government also suspended operations at the port of Santa Marta in early 2013 following an
incident where a barge capsized, releasing 300 tonnes of coal into the ocean. To prevent these
types of accidents, new transport rules requiring the use of enclosed transport systems will be
introduced from early 2014.
Following an estimated 6 per cent decline in exports in 2013, Colombia’s thermal coal exports are
forecast to increase by 9 per cent in 2014 to 84 million tonnes. The majority of Colombia’s thermal
coal exports are destined for markets in Europe. Over time, Colombia is expected to export
increasing quantities of coal to Asia as demand expands in the region and import demand in
Europe weakens.
The US
The use of coal in the United States is being reduced through a combination of regulation and
reduced competitiveness against gas. The US coal-fired generation fleet is aging, around 17 per
cent of the fleet is more than 50 years old and a further 24 per cent is more than 40 years old.
These plants are likely to be closed in the coming years, and are not being replaced by new
capacity. Only an estimated 5 gigawatts (around 1 per cent of current capacity) is expected to be
commissioned before the end of 2014.
Lower domestic consumption has resulted in a number of producers redirecting their output to
export markets, largely in the Asia-Pacific. However, lower thermal coal prices have reduced the
financial incentive to export. Consequently, US thermal coal exports are forecast to decline by 13
per cent in 2014 to 41 million tonnes.
Australia’s export volumes and values
In 2013–14, Australia’s production of thermal coal is forecast to increase by 4 per cent to 247
million tonnes. Accordingly, exports of thermal coal are forecast to increase by 5 per cent to 191
million tonnes in 2013–14. Earnings from thermal coal exports are forecast to increase by 6 per
cent to $17.2 billion as higher volumes and the effect of a depreciating Australian dollar more than
offset declining coal prices.
Figure 2: Australia’s thermal coal exports
Please refer to page 20 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Table 1:
Thermal coal outlook
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Resources outlook
Steel and steel-making raw materials
Tom Shael
Bulk commodity prices
Iron ore spot prices for 62 per cent iron ore content free on board (FOB) Australia averaged around
US$122 a tonne in the third quarter of 2013. This represented an unseasonal increa se of 4 per cent
quarter-on-quarter. The likely cause of the sustained higher pricing in this quarter, and throughout
2013 as a whole has been the low levels of iron ore inventories at Chinese ports combined with
record levels of China’s monthly steel output. For 2013 as a whole, spot prices are expected to
average around US$126 a tonne (see Figure 1). In 2014, spot prices are forecast to moderate to
average around US$119 a tonne.
On October 18 the world’s first iron ore futures contracts with physical deli very were listed on the
Dalian Commodity Exchange. The Yuan denoted contracts are for 100 tonnes of ore graded at 62
per cent iron, have a daily price trading band of 4 per cent and a minimum trading margin of 5 per
cent.
Benchmark contract prices for high-quality hard coking coal delivered in the December quarter 2013
settled at US$152 a tonne, a significant premium to the prevailing spot prices. For 2013 as a whole,
contract prices averaged US$159 a tonne. High quality hard coking coal contract prices are forecast
to decrease to average around US$150 a tonne in 2014, in response to a plenitude of seaborne
supply.
Figure 1: Raw material prices, FOB Australia
Please refer to page 22 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
World steel consumption
In 2013, world steel consumption is estimated to have increased by 3 per cent to total 1.58 billion
tonnes. Nearly 90 per cent of this growth is estimated to stem from additional consumption in
China. In 2014, world steel consumption is forecast to increase by about 3 per cent, compared with
2013, to total 1.63 billion tonnes (see Table 1).
Table 1:
World steel consumption and production
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
China’s steel consumption in 2013 is estimated to increase by 5 per cent, to total 725 million
tonnes. The growth is expected to be a result of increased construction activity associated with new
housing and commercial buildings and Government funded infrastructure projects. The continuation
of this construction activity into 2014 is forecast to support steel consumption increasing further to
754 million tonnes.
Despite a spike in South Korea’s automobile exports in October, the trend has been for declining
exports throughout 2012 and 2013. This has also corresponded with declining steel consumption
over the period. In 2014, steel consumption is forecast to increase marginally to 56 million tonnes.
World steel production
World steel production is estimated to increase by 4 per cent in 2013, compared with 2012, to total
1.60 billion tonnes. Further growth of 2 per cent is forecast in 2014, to a total of 1.64 billion tonnes.
China’s steel production totalled less than 65 million tonnes in only three of the first 10 months of
2013. Furthermore, the lowest monthly production of 61.8 million tonnes in February was higher
than every monthly total achieved in 2012. For 2013 as a whole, steel production is estimated to
total 776 million tonnes, up by nearly 10 per cent. China’s steel production in 2014 is forecast to
increase by 3 per cent, relative to 2013, to total 803 million tonnes. The growth is the result of
higher domestic consumption demand from housing construction and inf rastructure projects.
India’s steel production from January to October 2013 was 66 million tonnes, around 4 per cent
higher than the corresponding period in 2012. For 2013 as a whole, India’s steel production is
forecast to increase by 4 per cent to total 80 million tonnes. Steel production is forecast to grow
again at 4 per cent to total 83 million tonnes in 2014, in line with more modest activity associated
with an election year.
Figure 2: Quarterly world steel production
Please refer to page 24 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
World trade in iron ore
World trade in iron ore in 2013 is estimated to increase by 4 per cent, relative to 2012, to total 1.20
billion tonnes. World trade of iron ore in 2014 is forecast to increase by a further 9 per cent to 1.31
billion tonnes (see Table 2).
Iron ore imports
China’s imports of iron ore in 2013 are estimated to increase by 6 per cent, compared with 2012, to
total 793 million tonnes. The growth in imports is proportionally lower than that of China’s steel
production due to higher domestic production of iron ore. In 2014, imports are forecast to increase
by a further 7 per cent to total 852 million tonnes. Growth in imports is expected as a result of
forecast continued strong steel production and limited potential to increase substantially production
of domestic ore that has sufficiently high iron content.
Table 2:
World iron ore trade
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Iron ore exports
In 2013, Brazil’s iron ore exports are estimated to decrease by 1 per cent to total 322 million
tonnes, in line with lower total ore production. In 2014, Brazil’s exports are forecast to increase to
352 million tonnes, as additional ore from expansions at Vale’s Conceição Itabiritos and Carajas
operations is sold on international markets.
The Indian Supreme Court has maintained the mining ban that is in place in the key iron ore
producing state of Goa. The court did allow, however, the auction of around 11 million tonnes of
stockpiled ore, which would likely be exported. In 2013, India is estimated to have net exports of
around 11 million tonnes before increasing to a forecast 13 million tonnes in 2 014 supported by
exports of the stockpiled Goan ore.
In 2013, Australia’s exports of iron ore are estimated to increase by 18 per cent, relative to 2012, to
total 581 million tonnes. The increase has been supported by expansions at a number of projects
owned by Australia’s larger operators, including Fortescue and BHP Billiton. In 2014, Australia’s
iron ore exports are forecast to increase by a further 22 per cent, to total 709 million tonnes. The
second year of growth is forecast as the large amount of investment in recent years in mines and
infrastructure, particularly in the Pilbara region of Western Australia, enters the production phase.
This includes projects such as: Fortescue Metal Group’s Solomon Hub (60 million tonnes); BHP
Billiton’s Jimblebar mine (35 million tonnes); and Rio Tinto’s Hope Downs 4 (15 million tonnes).
World trade in metallurgical coal
World trade of metallurgical coal is estimated to increase by 7 per cent in 2013 to total 309 million
tonnes. In 2014, world trade is forecast to increase by a further 3 per cent to 319 million tonnes
supported by strong import growth in China (see Table 3).
Table 3:
World metallurgical coal trade
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Metallurgical coal imports
In 2013, China’s metallurgical coal imports are estimated to increase by 30 per cent to 92 million
tonnes. In 2014, China’s imports are forecast to increase by a further 8 per cent to total 99 millio n
tonnes. The growth in these years, and particularly in 2013, has and is forecast to be supported by
continuing strong growth in steel produced in blast furnaces.
Metallurgical coal exports
In 2013, Australia’s exports of metallurgical coal are estimated to increase by 12 per cent to 162
million tonnes. In 2014, increased production from various mines in Queensland is forecast to
support a 4 per cent increase in metallurgical coal exports, to total 168 million tonnes. Production
from a number of new and expanded mines that have been commissioned recently, such as BMA’s
Daunia and Rio Tinto and Mitsui’s Kestrel mines, are expected to support further the increase in
exports.
Australia’s bulk commodity exports
In 2013–14, Australia’s export volumes of iron ore are forecast to increase by 23 per cent to total
650 million tonnes. Export values are forecast to increase by 44 per cent, as an assumed lower
Australian dollar exchange rate boosts the received price of Australian exporters despite a slight
drop in forecast US dollar prices.
Figure 3: Australia’s iron ore exports
Please refer to page 27 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
In 2013–14, Australia’s exports of metallurgical coal are forecast to increase by 6 per cent to 164
million tonnes. In line with higher export volumes, earnings are forecast to increase by 8 per cent to
$24.2 billion (see Figure 4).
Figure 4: Australia’s metallurgical coal exports
Please refer to page 28 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Table 4:
Steel and steel-making raw materials outlook
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Gold
Kate Penney and John Barber
Gold prices
Gold prices continued to decline in the September quarter 2013, averaging US$1326 an ounce.
This average price was 6 per cent lower than the June quarter 2013 and 20 per cent lower than the
September quarter 2012. Prices have decreased throughout 2013 amid speculation the US would
taper its QE3 bond purchasing program with the subsequent increase in bond yields making gold
less appealing as an investment asset. While tapering has yet to be announced by the US FOMC,
speculation has been sufficient to drive a 25 per cent decrease in the gold price from around
US$1650 in January to US$1220 in December.
For 2013 as whole, prices are estimated to average US$1413 an ounce, 15 per cent lower than
2012. Gold prices are forecast to decline a further 14 per cent to average US$1220 an ounce in
2014 in response to further speculation and then the actual tapering of QE3. While fabrication
consumption, particularly jewellery purchases, are expected to increase at thes e lower prices this is
likely to be offset by declining demand for gold as investment asset.
Figure 1: Quarterly gold prices
Please refer to page 29 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Gold demand
In 2013 total world gold demand is estimated to have decreased by 13 per cent to around 3887
tonnes due primarily to Exchange Traded Funds (ETFs) reducing their gold holdings and becoming
net sellers. Fabrication demand is estimated to have increased by 12 per cent to more th an 2900
tonnes because of large increases in jewellery purchases in China and India. According to the
World Gold Council, fabrication consumption in China was 30 per cent higher in the 12 months to
September 2013 than September 2012. For the same period, India’s fabrication consumption
increased by 24 per cent. While lower gold prices have reduced investment purchases they have
led to increased jewellery consumption in these key markets. However, in India the new sales tax to
limit the importation of gold is expected to have moderated gold purchases in the final quarter of
2013.
In 2014, fabrication demand is forecast to increase 3.2 per cent to total 3032 tonnes, underpinned
by sustained growth in China’s consumption. Continued growth in incomes and the num ber of
middle class consumers and lower prices are expected to lead to higher jewellery purchases in
China in 2014.
During September 2013, the People’s Bank of China announced its intention to allow more
companies to trade gold and reduce the restrictions on individual buyers. If implemented, this could
support increased private purchases in China in 2014. However, it is not expected to offset the
decline in ETF purchases, with further sales of existing holdings likely.
Gold mine production
World gold mine production is estimated to have increased by 2.6 per cent in 2013 to 2935 tonnes.
The declining gold price has led to a number of higher cost mines either closing or being placed on
care and maintenance. These have mostly been smaller mines and the loss in production from their
closure has been offset by the commissioning of new larger mines and the continued increase to
full capacity at mines opened in 2012.
In 2014, lower gold prices are expected to result in the closure of some of the more marginal
producers. Nevertheless, lower cost operations are expected to increase production by targeting
higher grades and increasing production rates to minimise their average cost of production. As a
result, world gold mine production is forecast to increase 2.6 per c ent to 3010 tonnes.
Australia’s production and exports
Rising costs and declining gold prices reduced the profitability of Australian gold producers during
2013. Consequently, companies are assessing their options to reduce costs including changing
production plans, cutting exploration activities, postponing expansion plans, divesting Australian
assets or placing uneconomic assets under care and maintenance. Reflecting this, Australian gold
production is forecast to decline by 3 per cent in 2013–14 to 247 tonnes as lower output from
existing mines more than offsets increasing output from the Tropicana joint venture between
AngloGold Ashanti and Independence Group (14 tonnes a year) that was commissioned during the
September quarter 2013.
Australian gold exports are produced using a combination of domestically sourced ore and imports
of gold dore (impure gold) and scrap. In 2013–14, Australia’s exports are forecast to decrease by 4
per cent, relative to 2012–13, to 270 tonnes as lower domestic output more than offsets increased
imports of dore. Earnings from gold exports are forecast to decline by 20 per cent to $12.1 billion,
as lower volumes and prices are expected to more than offset the effect of a depreciating Australian
dollar.
Figure 2: Australia’s gold exports
Please refer to page 31 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Table 1:
Gold outlook
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Aluminium
Simon Cowling
Prices
Aluminium prices continued to decline in the September quarter as production outpaced
consumption growth, contributing to rising stocks. The aluminium spot price averaged US$1781 a
tonne in the September quarter, 3 per cent lower than in June. Prices declined progressively in
October and November, reaching US$1700 in early December.
For 2013 as a whole, the aluminium price is estimated to have averaged US$1849 a tonne, 8 per
cent lower than 2012 (see Figure 1). Primary aluminium production has continued to increase
despite announced production curtailments in Russia, North America and China, as new, efficient,
low cost smelters replace outdated capacity. As a result world aluminium markets continue to be
oversupplied with aluminium stocks totalling 7.4 million tonnes or 8.3 weeks of consumption.
In 2014, the price of aluminium is forecast to average around US$1896 a tonne, an increase of 3
per cent relative to 2013. Production curtailments announced in 2013 are expecte d to have a more
noticeable effect in 2014 with the loss of a full year’s production. As a result, stocks are forecast to
decline to 7.8 weeks of consumption, releasing some of the downward pressure on prices.
Figure 1: Annual aluminium prices and stocks
Please refer to page 33 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Consumption
World aluminium consumption is estimated to have increased by around 2 per cent in 2013 to 46.5
million tonnes, as strong growth in India and China more than offset contracting consumption in
Europe. In 2013, China’s aluminium consumption is estimated to have increased 7 per cent to total
21.7 million tonnes. Growth in automobile production has been one of the principal drivers of
aluminium consumption in China; in the first ten months of 2013 production was 13.6 per cent
higher year on year.
Following a 19 per cent increase in aluminium consumption in 2012, growth in US aluminium
consumption moderated in 2013. Underpinned by strong growth in automobile production, US
aluminium consumption is estimated to have increased by 1 per cent to 4.9 million tonnes. The slow
pace of economic recovery in Europe has continued to affect the region’s aluminium consumption in
2013 which is estimated to have declined 3 per cent to total 7.7 million tonnes.
In 2014, world aluminium consumption is forecast to total around 48.3 million tonnes, an increase of
4 per cent compared to 2013. Further growth in demand for passenger cars in China is expected to
underpin China’s aluminium consumption increasing 6 per cent to 23 million tonnes. Similarly,
growth in automobile production is forecast to support growth in aluminium consumption in Brazil (3
per cent to 947 000 tonnes), Thailand (6 per cent to
555 000 tonnes) and Mexico (5 per cent to 156 000 tonnes).
Rising automobile production and growth in new housing construction is expected to support growth
in US aluminium consumption. US housing permits, a leading indicator of construction activity,
increased 18 per cent in the first 10 months of 2013. In 2014, US consumption is forecast to
increase by 2 per cent to 5 million tonnes. Consumption in Europe is forecast to remain relatively
steady as economic recovery within the region continues.
Production
World aluminium production is estimated to have decreased 1 per cent in 2013 to total 46 million
tonnes as a result of production curtailments and closures. UC Rusal, Chalco and Alcoa cut
capacity by around 1 million tonnes in 2013 as a result of on-going low prices and continued
oversupply in the market.
Following a strategic review decision reached in August 2013, Rio Tinto Alcan completed the shut
down of its Shawinigan smelter in Canada (100 000 tonnes) during November. In October 2013,
Ormet closed the remaining two of six potlines at its Hannibal smelter (around 90 000 tonnes) in the
US. Ormet failed to secure electricity cost relief following an Ohio Public Utilities Commission
decision regarding lower supply costs from current supplier American Electric Power. These
closures contributed to North American production declining an estimated 7 per cent to 4.5 million
tonnes in 2013.
China’s production is estimated to have increased by around 6 per cent to 21.5 million tonnes.
Lower energy costs have encouraged higher output at sm elters in the northwest provinces and
restarts in Guangxi and Sichuan. These production increases will offset capacity cuts at out -dated
and inefficient operations, as the government strives to achieve emissions and sustainable growth
targets outlined in its 12th Five-Year Plan.
World aluminium production is forecast to increase by around 5 per cent to total 48.2 million tonnes
in 2014. China’s production is forecast to increase by 7 per cent to 23 million tonnes as new
capacity in the northwest continues to approach capacity. New projects in India and the Middle East
will also contribute to growth in world production. Production in North America is not expected to
rebound and production is forecast to decrease by a further 4 per cent to total 4.4 million to nnes.
Australia’s production and exports
In 2013–14, aluminium production in Australia is forecast to decrease by 1 per cent to 1.76 million
tonnes. Forecast sustained price pressures and increasing production costs will limit higher
production growth in Australia in the short-term. Supported by Federal and Victorian Government
assistance packages approved in 2012, production at Alcoa’s Point Henry smelter is expected to
continue through 2013–14 while the company reviews its global operations.
Lower production volumes are expected to contribute to a forecast 0.3 per cent decline in
Australia’s exports of aluminium to 1.57 million tonnes in 2013–14. Forecast lower export volumes
and lower aluminium prices will underpin a fall in the value of aluminium exports in 2013–14 (see
Figure 2). Export values are forecast to decrease by 1 per cent to $3.2 billion.
Figure 2: Australia’s aluminium exports
Please refer to page 35 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Alumina
Prices
The alumina spot price averaged US$318 a tonne in the September quarter, 3 per cent lower than
in June. For 2013 as a whole, alumina prices are estimated to have increased by 3 per cent to
US$327 a tonne. In 2014, prices are forecast to decrease by 1 per cent to US$324 a tonne as a
result of oversupply, particularly as China strives to achieve self -sufficiency. Expected production
increases in production from new low-cost, efficient greenfield refineries in Guizhou and Shanxi
near bauxite deposits will be the main contributors.
Australia’s alumina production and exports
Australian production in 2013–14 is forecast to total around 20.9 million tonnes, a decrease of 3 per
cent relative to 2012–13. In November 2013, Rio Tinto announced its decision to suspend alumina
production at the Gove refinery as a result of on-going economic losses, low prices, and higher
exchange rates. The shutdown process is expected to begin in March quarter 2014, with future
operations at Gove shifting focus to bauxite production.
As a result of the Gove closure, Australia’s exports of alumina are expected to decrease by 7 per
cent to 17.9 million tonnes in 2013–14 (see Figure 3). Australia’s alumina export values are forecast
to increase by 14 per cent to $6.1 billion in 2013–14 mainly due to the expected depreciation of the
Australian dollar offsetting lower alumina prices and export volumes.
Figure 3: Australia’s alumina exports
Please refer to page 36 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Bauxite exports
Australia’s bauxite exports are forecast to increase by 9 per cent to 13.7 million tonnes in 2013 –14.
Forecast increased demand from China, seeking alternative sources to Indonesian bauxite both
prior to and after the proposed January 2014 Indonesian export ore ban, will be the main
contributor to growth. This will be supported by the export of excess bauxite no longer required for
alumina production following the closure of the Gove refinery. The rise in volumes will underpin the
forecast 23 per cent growth in bauxite earnings to total $471 million in 2013–14.
Table 1:
Aluminium outlook
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Copper
Peta Nicholson
Prices
Copper prices in the September quarter 2013 averaged US$7079 a tonne, down 0.9 per cent on the
June quarter 2013. For the year 2013, prices are estimated to have averaged around US$7300, 8.2
per cent lower than the average price for 2012. This price decrease was due to world copper
production exceeding world copper consumption with the resulting surplus estimated at around 140
000 tonnes. This market balance was reflected in higher copper stocks accumulated over the year
which grew from 2.8 weeks of consumption at the end of 2012 to an estimated 3 weeks of
consumption at the end of 2013.
Copper prices are forecast to average US$6915 in 2014, 5.3 per cent lower than 2013 due to
continuing market oversupply. World copper stocks are forecast to increase further to 3.4 weeks at
the close of 2014.
Figure 1: Annual copper prices and stocks
Please refer to page 38 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Consumption
World copper consumption is estimated to have totalled 20.8 million tonnes in 2013, 3.6 per cent
higher than 2012. Chinese consumption growth overshadowed contractions in copper consumption
in Japan, South Korea and Chinese Taipei, such that consumption in Asia increased 3.9 per cent to
an estimated 13.8 million tonnes. China’s copper consumption is estimated to have increased 5.3
per cent to 9.3 million tonnes and accounts for almost half of estimated world consumption in 2013.
China’s increase in copper consumption was supported by further growth in residential and
commercial construction as well as investment in developing electricity transmission networks.
Investment in electricity networks and construction activity in other emerging Asian economies and
the Middle East also supported higher copper consumption in the region.
Copper consumption in North and South America is estimated at 2.9 million tonnes in 2013, 4 per
cent higher than 2012. Increased construction activity, due primarily to supportive monetary policies
and credit availability, supported an estimated 6 per cent increase in copper consumption in the US,
with consumption rising to around 1.8 million tonnes. Copper consumption in Brazil is estimated at
0.4 million tonnes in 2013, 1 per cent higher than 2012.
World copper consumption is forecast to rise by 3.2 per cent in 2014 to 21.4 million tonnes. China is
expected to remain the largest copper consumer in 2014 and be the principal source of
consumption growth. China’s continued urban and industrial expansion is expected to underpin a
further 3.2 per cent increase in its copper consumption.
Production
Mine production
Copper mine production is estimated to have been 17.7 million tonnes in 2013, 4.2 per cent higher
than 2012. Production increases at the Antapaccay mine in Peru (160 000 tonnes) and Oyu Tolgoi
mine in Mongolia (430 000 tonnes) contributed to mine production growth. New mining operations
moving towards full capacity will underpin continued growth in the supply of copper through 2014,
with 2014 mine production forecast at 18.5 million tonnes, an increase of 4.2 per cent compared to
2013.
Refined production
In 2013 world refined copper production is estimated to have increased to 20.9 million tonnes, an
increase of 3 per cent compared to 2012. This expansion was due mainly to growth in Asia which
offset lower production in Europe.
Refined copper production in Asia is estimated to have increased by around 6.3 per cent in 2013,
relative to 2012, to 10.4 million tonnes. China’s output increased by an estimated 11.4 per cent to
6.5 million tonnes. This expansion was the result of new operations coming online that outweighed
government imposed shut downs directed as part of new environmental policies to reduce pollution.
In 2014 world refined production is forecast to increase by 3.4 per cent to 21.6 million tonnes.
Production in Europe is forecast to remain relatively stable at 3.6 million tonnes. Refined production
in Asia is forecast to increase 3.3 per cent to 10.8 million tonnes. While Chinese production growth
is expected to slow to 2.3 per cent, refined copper production in India is forecast to increase 21 per
cent, or around 120 000 tonnes, as Indian production rebounds from a fall in 2013, which was
associated with the temporary closure of Vedanta’s Sterlite Copper Smelter in Tuticorin.
Refined copper production in North and South America is forecast to rise by 6.2 per cent in 2014 to
total 5.3 million tonnes. This growth is attributable to production increases in t he US (116 000
tonnes) and Mexico (75 000 tonnes).
Australia
Mine production
Australian copper mine production is forecast to increase by 4.3 per cent in 2013 –14 to around 1
million tonnes. This rise is attributable to increasing production volumes from Gl encore Xstrata’s
Ernest Henry and Mount Isa operations. Increased production at Newcrest Mining’s Cadia Valley,
CST mining’s Lady Annie and Inova Resources’ Osborne projects are also expected.
Copper production at Olympic Dam has been affected by smelter disruptions in the September
quarter 2013. A maintenance outage is scheduled for the March quarter 2014 to address the
issues, although BHP Billiton expects 2013–14 production will still be in line with 2012–13.
Refined production
Australian refined copper production is forecast to increase by 3.9 per cent in 2013–14, relative to
2012–13, to total 471 000 tonnes. Contributing to the expected rise is Glencore Xstrata’s Townsville
refinery and, to a lesser extent, CST Mining’s Lady Annie operation. Refined cop per output from
Olympic Dam is expected to return to normal production levels in March 2014 following smelter
maintenance outages.
Exports
In 2013–14 Australia’s copper export volumes are forecast to rise by 1 per cent to 985 600 tonnes
(by metal content). The value of copper exports is forecast to be $8.6 billion in 2013–14, 6.3 per
cent higher than 2012–13. This forecast rise is due to both higher export volumes and higher
Australian prices associated with a lower Australian dollar exchange rate in 2013 –14 relative to
2012–13.
Figure 2: Australia’s copper exports
Please refer to page 41 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Table 1:
Copper outlook
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Nickel
Tom Shael
Nickel prices and stocks
The average London Metal Exchange (LME) price for nickel in the September quarter 2013
averaged US$13 916 a tonne, down 7 per cent on the previous quarter. The average price for the
December quarter 2013 is forecast to decrease further to around US$13 500 a tonne.
In 2014, production curtailments at existing nickel refineries are forecast to result in refined
production decreasing by 3 per cent to total 1.80 million tonnes. Consumption, however, is forecast
to increase at a higher pace of 2 per cent to total 1.82 million tonnes. The growth in consumption is
in line with moderate, but robust, demand growth in emerging Asian economies, particularly China.
As a result of consumption demand outstripping supply growth, prices are forecast to increase
through 2014 and to average around US$14 600 for the year. The difference in consumption and
supply is also expected to result in stocks falling to around 8.3 weeks of consumption.
Figure 1: Annual nickel prices and stocks
Please refer to page 42 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Australia’s production and exports
Nickel mine production in Australia in 2013–14 is forecast to fall by 11 per cent to total 216 000
tonnes. Australia’s refined nickel production is forecast to decrease by 2 per cent in 2013 –14 to
total 132 000 tonnes. The decreases are forecast a result of production continuing to be scaled back in response to lower world nickel prices, despite an assumed lower Australian dollar exchange
rate providing a boost to the Australian dollar nickel price.
Australia’s export volumes of nickel in 2013–14 are forecast to decrease by 10 per cent, relative to
2012–13, to total around 228 000 tonnes. Export earnings in 2013–14 are forecast to decrease
proportionally more, falling by 16 per cent to around $3 billion, as a result of both lower export
volumes and a lower average Australian dollar price.
Figure 2: Australia’s nickel exports
Please refer to page 43 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Table 1:
Nickel outlook
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Zinc
Simon Cowling
Zinc prices and stocks
The spot price of zinc averaged US$1859 a tonne during the September quarter, an increase of 1
per cent relative to the June quarter. Global zinc stocks declined by around 5 per cent compared to
June driven by increased consumption in China. The declining stocks supported a slight rise in the
average zinc spot price in the September quarter.
World zinc consumption is estimated to have increased by 5 per cent to 13 million tonnes in 2013.
However, production is estimated to have increased 4 per cent to 13.1 million tonnes. As a result of
this oversupply of zinc, the average spot price for zinc is estimated to have decreased by 2 per cent
to US$1902 a tonne (see Figure 1).
In 2014, world zinc consumption is forecast to increase by a further 4 per cent to 13.5 million
tonnes, supported by increased demand for galvanised steel products in emerging economies.
Higher ore and concentrate production in China, India and Africa is expected to offset reduced
output from Canada following the closure of Glencore Xstrata’s Brunswick and Perseverance mines
in 2013. World refined zinc production is forecast to increase by 4 per cent to 13.6 million tonnes
driven by higher output from newly commissioned projects in China.
While the zinc market is forecast to remain oversupplied for 2014 as a whole, the supply-demand
balance is expected to tighten later in the year as large mines begin to wind down production ahead
of closing. As a result, zinc prices are forecast to increase in the second half of 2014. For the full
year, zinc prices are forecast to average US$1921 a tonne, an increase of 1 per cent relative to
2013.
Figure 1: Annual zinc prices and stocks
Please refer to page 44 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Australia’s production and exports
In 2013–14, Australia’s mined production of zinc (total metallic content) is forecast to increase by 2
per cent to 1.5 million tonnes. This increase will be underpinned by increased productio n from new
capacity commissioned between 2012 and early 2014 including CBH Resources’ Rasp Broken Hill
mine (34 000 tonnes); Glencore Xstrata’s Lady Loretta mine (126 000 tonnes), George Fisher and
McArthur River expansion (200 000 tonnes); and Perilya’s Potosi mine expansion (45 000 tonnes).
This new capacity will be partially offset by lower production at MMG’s Golden Grove mine (70 000
tonnes), which is expected to focus on copper production and Terramin’s Angas Zinc mine (25 000
tonnes) that was placed on care and maintenance. Australia’s total refined production is forecast to
grow by 0.4 per cent to 498 000 tonnes.
Zinc export volumes are forecast to increase by 0.2 per cent to 1.6 million tonnes in 2013 –14,
underpinned by the moderate rise in zinc production (see Figure 2). In 2013–14, Australia’s zinc
export earnings are forecast to increase by around 11 per cent to $2.4 billion, supported by higher
volumes, forecast higher prices and an assumed deprecation in the Australian dollar.
Figure 2: Australia’s zinc exports
Please refer to page 45 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Table 1:
Zinc outlook
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.
Resources
and Energy
Quarterly
Statistical tables
Contribution to GDP
Please refer to page 48 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Principal markets for Australian imports
Please refer to page 48 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Principal markets for Australian exports
Please refer to page 49 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Principal markets for resources and energy exports
Please refer to page 50 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Tables 1–2:
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 statistical data
Excel workbook.
Table 3:
Contribution to exports by sector, balance of payments basis, Australia
Please refer to page 52 of the Resources and Energy Quarterly – December quarter 2013 PDF version.
Tables 4–41:
Please refer to the associated Excel sheet of the Resources and Energy Quarterly – December quarter 2013 commodity
data Excel workbook.