Coal and iron help break Australia's exports record

SYDNEY - Coal and iron ore shipments may help to boost Australia's commodity export sales 16 per cent to a record, as BHP Billiton, Rio Tinto and other producers spend A$24 billion ($26 billion) raising output to meet China's demand.

An Australian Bureau of Agricultural and Resource Economics report said yesterday that commodity sales could total A$114.6 billion in the year ending June 30, 2006, or about 55 per cent of the country's exports.

Commodities were expected to earn A$98.6 billion in 2004-05.

Australia, the world's biggest coal and iron ore supplier, is benefiting after China's economy expanded 9.5 per cent last year, spurring demand for raw materials used in construction and car production.

Sales of coal and iron ore will add A$12.3 billion to export earnings in 2005-06 and narrow a trade deficit that widened to the second highest on record in January.

"The growth in the Chinese market in steel production and demand for commodities is something we've never seen before," said Tony Haggarty, managing director of Excel Coal, the best-performing company this year on Australia's benchmark stock index.

"There's reason to believe that the demand has got plenty of strength left in it."

Prices for coal, Australia's biggest commodity export, will be higher than forecast for at least the next three years, pushed to a record by surging steel production in China, says Merrill Lynch.

Abare said overseas sales of coal, used by steelmakers and power generators, will earn the economy A$25.8 billion in 2005-06, 51 per cent more than a year earlier.

Exports of iron ore, the country's second-biggest commodity earner, will earn A$13 billion next fiscal year, up 60 per cent.

Brian Fisher, Abare's executive director, said the forecasts reflected "markedly higher negotiated prices for coal and iron ore and increased export shipments in response to international demand".

Benchmark export prices for hard coking coal, the type used by steelmakers, will jump 120 per cent to US$125 a tonne in the year beginning April 1. Iron ore prices are poised to increase about 72 per cent in the same period.

David Thurtell, a commodity strategist with Commonwealth Bank of Australia in Sydney, said the increases would improve Australia's trade balance by between A$1.5 billion and A$1.75 billion next month.

- BLOOMBERG