Gas and coal prices continue to rise to record levels that will boost Australian revenues next year (2023), as it seems that the repercussions of the Russian invasion of Ukraine will not be enough to stand behind market volatility during the current year (2022).
Revenues from the metals and energy sectors in Australia are supported by 3% from global prices, to reach A$419 billion by the end of the current fiscal year (July 1, 2022 to June 30, 2023), according to forecasts seen by the Specialized Energy Platform.
A report that included government forecasts for the fiscal year in Australia warned of any power supply disruptions; To avoid further increases in the prices of gas, coal and energy resources in general, according to what was published by Reuters today, Sunday, July 3rd.
Australian gas and coal exports
The Australian Ministry of Industry confirmed that Western countries’ lack of Russian energy supplies and their attempt to provide alternatives, are extending the rise in prices of gas, coal and other energy commodities for a period beyond previous expectations.
In numbers, expectations contained in the ministry’s quarterly report on resources and energy revealed, by the end of June next year (2023), that the revenues of liquefied gas exports would jump by 19%, equivalent to 84 billion Australian dollars.
It is noteworthy that these expectations come despite the decline in production from the gas fields that supply the North West Shelf and the Darwin Project.
On the other hand, the Australian government expects to increase its exports of thermal coal used in electricity generation by 15%, to reach 44 million Australian dollars, taking advantage of the high prices, especially that Australian coal is the main alternative to Russian coal.
Forecasts included coke export earnings rising 3% to A$60 billion.
Ukraine’s war… and Australian iron
In total, gas and coal prices jumped to their highest levels in the global market, following the Russian invasion of Ukraine on February 24, and the repercussions of imposing sanctions on Moscow.
The Australian Ministry of Industry report indicated that in light of the continuing decline in energy stocks, any reduction is expected to push them towards additional price hikes, in reference to the expansion of the scope of sanctions against Moscow, to include basic energy resources.
The report pointed out that rising global interest rates would reduce revenues from exports of gas, coal and energy resources.
Meanwhile, coal and gas are the second and third largest Australian energy exports, respectively, which explains the expectations of their recovery by the end of the current financial year, in light of the continued market volatility as it is.
On the other hand, the ministry’s report warned of declines in coal production due to the heavy rains affecting eastern Australia.
As for iron, which is at the top of Australian exports, expectations indicate that it will follow the opposite trend of the rise in gas and coal export revenues, as its export earnings will decline by 12%, equivalent to 116 billion dollars, by the end of the fiscal year June (2023).
Expectations of a decline in iron export revenues coincide with a decline in its average prices from $119 per ton to $99 per ton.
Export ambitions and the electricity crisis
The ambitions to boost gas and coal export revenues come at a time when Australia has barely overcome a severe electricity crisis that affected the regularity of the current in 5 states, and the lack of generating capacities of gas and coal plants was the most prominent cause.
Australia has retired a number of gas and coal plants, and announced plans backed by a timetable to terminate the service of additional stations, as part of the new government headed by Anthony Albanese and the Labor Party to support renewable energy in the country, and increase its share in the electricity mix.
After stifling blackouts in Australia last June, the crisis subsided, after supplies resumed from an estimated one-third of the coal plants that had been idled earlier.
Source: XglobalMarkets
