The Australian Bureau of Agricultural and Resource Economics said met coal and iron ore demand is expected to remain strong and will underpin growth in Australian exports in the short term.

Exports of met coal are tipped to increase by 21% to 151 million tonnes for the 2009-10 financial year compared to the previous 12-month period.

But earnings are expected to be down by 36% year-on-year to $A23.5 billion because of lower contract prices and a strong Australian dollar – even though it has slipped against the US dollar in recent months.

For the 2010-11 financial year, ABARE predicts 1% growth to 151Mt of exports in the commodity, as Vale ramp ups production from its Carborough Downs longwall in Queensland and as a result of the completed terminal expansions at Abbot Point and Dalrymple Bay.

Met coal earnings are tipped to rocket 46% to $34.5 billion during the 2010-11 financial year on the back of higher contract prices, plus a slight increase in volumes.

While Cyclone Ului certainly caused some supply constraints a few months ago, the 7.7 million tonnes per annum Rapadskaya coking coal operation in Russia was halted because of a methane explosion in May.

“This is expected to further tighten the Asian market as a significant proportion of production is exported to Asia,” ABARE said.

“The mine is not expected to return to full production capacity until late 2010.”

Consequently the nation is forecast to reduce its 2010 exports in the commodity by 8% to 12Mt as other Russian mines ramp up to offset the loss of the country’s production leader.

Thermal Coal

Noting a spot price of $US98 a tonne for Newcastle thermal coal exports this month, ABARE said the price was up 40% year-on-year.

Australia’s production is expected to be 4% stronger for the current financial year at 213Mt.

ABARE said this increase will mainly come from the completion of several mines over the past 18 months, including New Hope’s New Acland and Whitehaven’s Rocglen open cut.

Thermal coal production is tipped to rise 10% to 234Mt for the upcoming financial year as Yancoal Australia’s Moolarben, Whitehaven’s Narrabri and Syntech Resources’ Cameby Downs mines start to chip in.

Exports of the commodity are tipped to increase 1% year-on-year to 137Mt for 2009-10, and shoot up to 155Mt in 2010-11 due to the recent completion of Newcastle Coal Infrastructure Group’s new terminal and an 11Mtpa expansion of Port Waratah Coal Services’ Kooragang Island Coal Terminal.

Thermal coal export earnings are estimated to fall by 32% year-on-year to $12.2 billion for 2009-10 because of lower contract prices and the stronger Aussie dollar.

For the next financial year they are expected to jump by 39% because of a recovery in contract prices, as evidenced by strong spot prices at the moment.