Contents
Executive Summary

4

Overview

5

Macroeconomic Outlook

16

Steel

30

Iron Ore

40

Metallurgical Coal

51

Thermal Coal

61

Gas

74

Oil

86

Uranium

95

Gold

100

Aluminium

110

Copper123

NickelResources insights
Macroeconomic Outlook – Box 2.1
Structural challenges to Chinese growth24

Aluminium – Box 11.1
Gallium – A by-product of processing bauxite

121

Battery Value Chain – Box 16.1
Trends in battery cathode chemistry

157

Battery Value Chain – Box 16.2
Alternative battery technologies

159

131

Trade summary charts and tables

162

Zinc

139

Appendix A: Definitions and classifications

170

Lithium

145

Appendix B: Glossary

172

Battery Value Chain

153

About the edition

178

Further information

Creative Commons licence

For more information on data or government initiatives please access the reportfrom the Department’s website at: www.industry.gov.au/oce

EditorDavid Thurtell

Chapter Authors

Resource and energy overview: David Thurtell
Macroeconomic overview and gold: Chris Mornement, Shin Cheng
Steel and iron ore: Colin Clark
Metallurgical coal, thermal coal and uranium: Mark Gibbons
Gas: Ben Lee and Briggs Soria
Oil and zinc: Justin Tang
Aluminium, alumina and bauxite: Andy Lee
Copper and nickel: Andrew Nash
Lithium: Charlie Qin
Battery Value Chain Special Topic: Charlie Qin
China Box: Justin Tang and Chris Mornement

Acknowledgements
The authors would like to acknowledge the contributions of:Michelle Dowdell, Silvia Gong, James Hutson, Alfonso Martínez Arranz andCrystal Ossolinski.
Cover image source: Shutterstock, Joaquin Corbalan P
ISSN 1839-5007
Vol. 13, no. 3© Commonwealth of Australia 2023

Ownership of intellectual property rights
Unless otherwise noted, copyright (and any other intellectual property rights, if any)in this publication is owned by the Commonwealth of Australia.

Attribution 4.0 International Licence
CC BY 4.0
All material in this publication is licensed under a Creative Commons Attribution 4.0
International Licence, with the exception of:• the Commonwealth Coat of Arms;• content supplied by third parties;• logos; and• any material protected by trademark or otherwise noted in this publication.
Creative Commons Attribution 4.0 International Licence is a standard form licenceagreement that allows you to copy, distribute, transmit and adapt this publication
provided you attribute the work. A summary of the licence terms is available fromhttps://creativecommons.org/licenses/by/4.0/.
Wherever a third party holds copyright in material contained in this publication,
the copyright remains with that party. Their permission may be required to use thematerial. Please contact them directly.

Attribution
Content contained herein should be attributed as follows:
Department of Industry, Science and Resources, Commonwealth of Australia
Resources and Energy Quarterly September 2023.
The Commonwealth of Australia does not necessarily endorse the content of thispublication. Requests and inquiries concerning reproduction and rights should be
addressed to req@industry.gov.au

Disclaimer
The views expressed in this report are those of the author(s) and do not necessarilyreflect those of the Australian Government or the Department of Industry, Scienceand Resources.
This publication is not legal or professional advice. The Commonwealth of Australia
does not guarantee the accuracy or reliability of the information and data in the
publication. Third parties rely upon this publication entirely at their own risk.
3

Executive Summary
The outlook for Australian resource and energy commodity exports has
improved slightly since the June 2023 Resources and Energy
Quarterly (REQ). In the September quarter, commodity prices held up
better than we expected in the June REQ, adding to the positive impact onexport revenues of the weaker AUD/USD. Australian exports are forecast
to fall to $400 billion in 2023–24, down from a record $467 billion in
2022–23. Exports are forecast to decline further to $352 billion in 2024–25.

Following the end of Chinese restrictions on Australia coal imports,
Australian thermal coal exports to China have returned to previous levels.
However, Australian metallurgical coal has struggled to regain Chinese
market share: new rail links have facilitated a recent surge of Mongolian
metallurgical coal exports to China in the past year or so, and Russia has
been able to divert some of its coal exports to China (and India) from theWestern nations which have banned Russian exports.

Economic growth in Western economies is holding up better than
expected in the June REQ, outweighing worries over the outlook for the
Chinese economy — the world’s largest consumer of resource and energy
commodities and Australia’s largest export destination. Relatively slow
growth in the Chinese economy in 2023 reflects a range of cyclical factors— including the slowdown in Western economies in 2023 and a downturnin the Chinese property sector — and structural factors — such as thegrowing share of consumption in GDP. Weaker economic growth in China
has led to bouts of weakness in iron ore and base metal prices, but recent
Chinese stimulus measures and low global inventories of most basemetals have helped limit price falls.

Since the June REQ, there have been major developments in battery
chemistry, with driving ranges rising and “refuelling” times falling towards
levels comparable with internal combustion engines. This quarter’s special
topic chapter explores the global battery value chain. So far, lithium
remains a central element in the improved battery chemistries anddemand outlook for lithium remains strong. Lithium prices have fallen fromthe peak in late 2022 as the global supply outlook has improved, but
remain well above levels in recent years. In volume terms, Australian
exports are expected to growth further, with lithium hydroxide making up
an increasing share of exports.

Energy prices have normalised relative to 2022, as global trade has now
largely reorganised in response to the sanctions placed on Russian
exports. However, prices remain above levels traded pre-Russian invasionof Ukraine: some Russian fossil fuel output remains stranded, limiting
world supply. Europe is likely to be the main driver of global LNG demand
over the outlook period, as the region continues to replace Russian
pipeline gas with LNG, mainly from the US. World oil stocks are low,making oil prices vulnerable to supply shocks.

Global investment continues to surge in all stages of the supply chain of
low emission and critical technologies, underpinned by government
assistance in many nations. Government actions are being driven byconcerns over both supply chain security and carbon emissions.
Investment is likely to pick up even further if interest rates start to fall.

The end of both the La Niña weather episode and major COVID-related
workforce disruptions have also helped improve world supply of mostresource and energy commodities. With high chances of drier than normal
conditions in eastern Australia over the next 6-9 months, the risk of mines
and transport routes being flooded are sharply reduced. But an El Niñodriven drought in Indonesia would lower river levels, making thermal coaldifficult to barge.

Resources and Energy Quarterly September 2023

4

5

1.1

Summary Resource and energy commodity prices fell (further) in the September
quarter 2023, driven by supply and demand factors mostly pushing in thesame direction. However, supply cuts by some major oil producers are
helping to stabilise oil prices, and inventory replenishment by consumers
is also helping support the prices of oil and other commodities.
 Australia’s resources and energy export earnings during the outlook
period are expected to be broadly in line with projections in the Junequarter 2023 Resources and Energy Quarterly (REQ). After a record$467 billion in 2022–23, weaker growth in world demand and improving
world commodity supply will cut prices and thus earnings to $400 billion
in 2023–24, with another significant fall likely in 2024–25.
 Despite the end of COVID restrictions, structural and cyclical factors are
causing China’s growth to remain relatively weak. A weaker outlook for
China is weighing on demand and commodity prices.

1.2

Macroeconomic, geopolitical and policy factors

World economic growth has steadied at a relatively low rate
The global macroeconomic backdrop remains less ebullient than in the
period when the worst of the pandemic had passed. Since the June REQ,
Western central banks have been forced to tighten monetary policy further
in order to rein in inflation. But the key development has been the lack of asolid recovery in China after COVID restrictions ended in late 2022.
The pace of monetary tightening in major Western countries has slowed
considerably in recent months, as the monetary authorities assess
whether previous interest rate hikes have been sufficient given long andvariable lags in the monetary policy transmission mechanism. Labour
markets continue to lose some of their extreme tightness, reducing upward
pressure on wages. Services inflation in Western economies now appears
to be subsiding, but energy prices appear to have stopped falling.
World economic growth steadied at relatively low levels in the June quarter
2023. The IMF now forecasts world GDP growth of 3.0% in 2023 and2024, down from growth of 3.5% in 2022. Growth in developed nations is
Resources and Energy Quarterly September 2023

expected to slow from 2.7% in 2022 to 1.5% in 2023 and 1.4% in 2024.
China is (still) forecast to grow by 5.2% in 2023 and by 4.5% in 2024.
Chinese recovery stalls on a mix of cyclical and structural influences
Chinese growth has proven slower than hoped in 2023, as cyclical andstructural factors weigh on the post-COVID recovery. The COVID
pandemic left households and the private sector in worse shape, andconfidence has been slow to recover. In addition, slowing global growth isweighing on demand for Chinese exports. These cyclical factors arecompounded by structural factors, such as the increasing share of
consumption in Chinese output, slowing urbanisation and population
growth, the oversupplied housing sector and the diversification of supply
chains. For more detail see Macroeconomic Outlook and Box 2.1.
Global trade still re-organising as a result of Russia’s invasion of Ukraine
As a result of the Russian invasion of Ukraine, Western Europe has
moved away from Russia toward the US as a commodity supply source.
Gas supply is the most affected; lower Russian pipeline supply coincides
with a surge in US LNG output, with the US set to become the leading
LNG exporter in the outlook period. Russia is sending more commodities
to China and India but is hitting transport capacity constraints.
The global energy transition picks up pace
Despite some regression in 2022 (in response to the fallout from theRussian invasion of Ukraine), the trend away from fossil fuels to achieve
net zero by 2050 remains intact. According to the IEA, global investment inclean energy is expected to reach US$1.74 trillion in 2023, bringing totalenergy investment in 2023 to US$2.8 trillion. Annual clean energy
investment has risen by 53% from 5 years ago, when investment in clean
energy and fossil fuels was roughly equal.
Global investment continues to surge in all stages of the supply chain of
low emission and critical technologies, helped in some nations bygovernment assistance aimed both at lowering carbon emissions andsecuring supply chains — domestically and/or in friendly nations. Australia
appears to be enjoying its share of this investment, especially at the6Australian thermal coal exports to China have returned to levels reached in
2019–20 — before trade impediments started in October 2020. In thewake of the trade impediments, Australian coal miners were able to pivot
away from China to nations such as India and South Korea. These exports
filled the gap that opened when Indonesian supply switched to China toreplace Australian exports.
New rail links have facilitated a recent surge of metallurgical coal exports
from Mongolia to China, limiting a recovery in Australia’s share of Chinese
metallurgical coal imports. Australian miners pivoted to India and othercustomers when the impediments were imposed. China and India haverecently lifted their imports of Russian coal, as bans on Russian exports bysome nations affect coal sales.
AUD weakness mainly due to China worries
The AUD/USD has shown bouts of fresh weakness since the publication of
the June REQ, mainly driven by growing concerns over the pace of growthin the Chinese economy. The currency market is also looking at the likely
peak in Australian versus US official cash rates over the outlook period.
The consensus forecast adopted is for the AUD/USD to lift modestly
during this time.
Risks are evenly balanced
Risks appear evenly balanced. While the outlook for the world economy isstill for only relatively modest growth in the outlook period, unemployment
remains low in historical terms, helping to sustain household consumption
and profitability. Unemployment may rise as the more recent official
interest rate hikes impact fully. Persistent inflation would require interest
Resources and Energy Quarterly September 2023

The emerging El Niño weather episode has the potential to impact thermal
coal markets. While Australian miners are less likely to be affected by theflooding of mines and transport routes that impacted during the La Niña ofthe 2020-23 period, drought in Indonesia will see river levels fall andcreate difficulties with barging — a very common way of accessing portsthat are deep enough for large cargo ships used in export trade.

1.3

Export values

Australia’s export values are forecast to be $400 billion in 2023–24
The world economic slowdown and fewer supply disruptions has generally
reduced commodity prices over the past quarter. The Resources andEnergy Export Values Index fell 20% from the September quarter 2022: asmall rise in volumes partly offset the impact of a sharp fall in prices.
Resource and energy exports are forecast at $400 billion in 2023–24,
down from a record $467 billion in 2022–23 (Figure 1.1).
Figure 1.1: Australia’s resource and energy export values/volumes
120

480

100

400

80

320

60

240

40

160

20

80

0
2007–08

2011–12

2015–16
Volumes

2019–20
Values2023–24

A$ billion

Thermal coal sales to China back to pre-ban levels

rates to stay high for longer, possibly raising unemployment. The RussiaUkraine conflict aside, geopolitical tensions have recently eased slightly.

Index, 2023–24 = 100

upstream stage. We can expect this type of investment to pick up evenfurther in many nations once interest rates start to fall: lower borrowing
costs will raise the net present value of investment projects, dragging
some of them over the line. Surging investment on low emission andcritical technologies in the US may exaggerate global investment: someinvestment in the US may merely be displacing investment elsewhere.

0

Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department ofIndustry, Science and Resources (2023)

7

Weak demand and improved global supply of commodities is likely todepress prices. A modest rise in export volumes will be too small to offset
the impact of prices sharply lower than in 2022–23 (Figure 1.2).
Export values are forecast to fall by 12% to $352 billion in 2024–25: prices
will fall but volumes will be flat.
Australian energy export earnings are set to fall sharply. LNG earnings are
forecast to fall by $21 billion to $71 billion in 2023–24, as prices settle well
below 2022 levels. A further fall of $8 billion is forecast in 2024–25.
Thermal coal exports are forecast to fall even more sharply, from$66 billion in 2022–23 to $36 billion in 2023–24 and $28 billion in 2024–25.
Figure 1.2: Annual growth in Australia’s resources and energy export
values, contributions from prices and volumes
45

1.4

PricesSince the June 2023 Resources and Energy Quarterly, most resource andenergy prices have fallen in US$ terms, as fears rise over the slow pace ofeconomic growth in China. The fall in prices broadly line up with the June
REQ forecasts when worries about growth in Western nations dominated.
While prices are generally likely to fall further over the outlook period, thesteepest drops seem behind us: the rate of recovery in supply has likely
peaked and OPEC+ will likely keep cutting supply to support prices.
In Australian dollar terms, the Resources and Energy Commodity Price
Index fell by 6% (preliminary estimate) in the September quarter 2023, tobe down 21% on a year ago. In US dollar terms, the index fell by 8% in thequarter, to be down 24% on a year ago. Resource export prices (in A$
terms) rose by 10% in the year to the September quarter 2023, whileenergy prices fell by 40% (Figure 1.3).
Figure 1.3: Resource and energy export prices, A$ terms
175

30

15

0

-15

-30
2007–08

2011–12
Prices

2015–16
Volumes

2019–20

2023–24

Values

Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department ofIndustry, Science and Resources (2023)

Index, September quarter 2023 = 100

Per cent

150
125
100
75
50
25
0
Jun–08

Jun–12
Resources

Jun–16
EnergyJun–20
Jun–24
Total resources and energy

Notes: The export price index is based on Australian dollar export unit values (EUVs, export
values divided by volumes); the export price index is a Fisher price Index, which weights
each commodity’s EUV by its share of total export values.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department ofIndustry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

8

In net terms, the gold price has softened since the last REQ as interest
rates have lifted: higher interest rates raise the opportunity cost of holding
gold. The prospect of interest rates staying high for longer is also harming
gold’s relative attractiveness as an asset. Worries over debt defaults in the
Chinese property market could boost Chinese demand. Base metal prices
have softened, as weaker growth in world economic activity — particularly
the sluggish rebound in the Chinese economy — adds to the impact ofimproved supply (Figure 1.5). Prices are expected to be soft over the restof 2023, but low inventories for most metals have/will put a limit on falls.
Price could pick up sharply once there are signs that China’s economy hastaken on a healthier hue. Since the last REQ, lithium prices (spodumene
and lithium hydroxide) have given up some more of the large gains ofrecent years. Supply is starting to respond to the high prices of 2022/early2023. Prices are expected to soften further but stay above 2020 levels.
Resources and Energy Quarterly September 2023

600
500
Index, June 2014 = 100

Oil prices have recently lifted to the top end of the US$70-90 a barrel
range traded since the start of 2023. Driving the rise has been supply cutsby Saudi Arabia. The US Administration has delayed replenishing thestrategic reserves by 6 million barrels, waiting for prices to fall to about
US$70 a barrel. Chinese imports have been strong, but it appears thatsome of this demand has been stockpiled rather than turned into gasoline
and diesel. LNG prices are forecast to fall over the outlook period, as tradeflows re-organise further and supply lifts. The US is set to surpass Qatar
and Australia to become the world’s biggest LNG exporter during theoutlook period, replacing Russian (pipeline) gas supply to Europe.

Figure 1.4: Bulk commodity prices

400
300
200
100
0
Jun–14

Jun–16Iron ore

Jun–18
Jun–20
Metallurgical coalJun–22
Jun–24
Thermal coal

Notes: Prices are in US dollars, and are the international benchmark prices
Source: Bloomberg (2023); Department of Industry, Science and Resources (2023)

Figure 1.5: Base metal prices
200
180
160
Index, June 2014 = 100

The iron ore price rose in the first half of September after worries over
Chinese demand saw it drop noticeably in August (Figure 1.4). The market
is watching for signs of enforced cuts in steel output by the Chinese
government. Metallurgical coal prices have edged down as worries overlow demand from Asian steel makers have added to the impact ofimproving supply. Prices remain above pre-war levels, as some Russian
supply remains stranded from world markets. Thermal coal prices haveheld steady above pre-war levels, as better demand largely offsets theimpact of improved supply. Worries over supply are likely to see Asianstockpiling ahead of the Northern Hemisphere winter.

140
120
100
80
60
40
20
0
Jun–14

Jun–16Jun–18
Jun–20
Jun–22
Aluminium
CopperNickelJun–24
Zinc

Notes: Prices are in US dollars, and are the international benchmark prices
Source: Bloomberg (2023); Department of Industry, Science and Resources (2023)

9

1.5

Export volumes

1.6

Contribution to growth and investment

September quarter export volumes rose

Mining output fell while the overall economy grew modestly

The Resources and Energy Export Volumes Index (preliminary estimate)rose 2% in the September quarter 2023 from the June quarter, to be up
8% on a year ago. Resource commodity volumes rose by 2.5% in the year
to the September quarter 2023, while energy export volumes rose by
11.9% (Figure 1.6). Base effects had an impact here: transport andproduction problems (associated with the weather and COVID) saw
energy exports hit a 4-year low in the September quarter 2022.

Australia’s real GDP rose by 0.4% in the June quarter 2023, to be up 2.1%
from a year before. Mining value-added fell by 1.3% in the June quarterbut was still 2.9% higher than in June 2022 (Figure 1.7). The quarterly fall
was driven by weaker Iron Ore Mining (down by 1.8% due to Cyclone Ilsa)
Oil and Gas Extraction (down 1.4% due to maintenance) and Other Mining(down by 2.5%). The falls were partly offset by a rise in Coal Mining (up by5.8%) as the end of the La Nina episode improved production/transport.

In volume terms, most resource exports are likely to show significant
growth over the outlook period, as the global energy transition accelerates.
Energy exports will level out in 2024, as the sharp price falls of the past
year temper production and encourage delayed maintenance to occur.
There are high odds of an El Niño climate episode starting in the next few
months, and the Indian Ocean Dipole recently breached the 0.4 threshold(and hit a 4-year high). Both phenomena dramatically lower the chances of
the type of wet weather disruptions that hampered the production andtransportation of Australian mining products in the two years before 2023.

In the coming two years, while the resource sector will likely contribute toreal GDP growth, the energy sector’s contribution will be modest at best
(Figure 1.6). The major production/transport disruptions of the past few
years — arising from the COVID-19 pandemic and weather-related issues— now seem well behind us. The output of metals should grow. Coal
producers will benefit from modest volume gains and prices that are stillhigh in historical terms. LNG exports are likely to be little changed.
Figure 1.7: Contribution to quarterly growth, by sector
6

Figure 1.6: Resource and energy export volumes

5

120

4
Percentage points

Index, September 2023 = 100

100
80
60
40

2
1
0
-1
-2

20
0
Jun–143-3
Jun–14
Jun–16Jun–18
Jun–20Resources

Jun–22
EnergySource: Department of Industry, Science and Resources (2023)
Resources and Energy Quarterly September 2023

Jun–24

Jun–16Jun–18
Coal mining
Oil and gas extraction
Mining total

Jun–20
Jun–22Iron ore mining
Other mining

Source: ABS (2023) Australian National Accounts, 5206.0

10

Mining investment is picking up year-on-year
The latest ABS Private New Capital Expenditure and Expected
Expenditure survey shows that Australia’s resources industry invested$12.8 billion in the June quarter 2023, up 11.9% from the June quarter2022. In quarterly terms, investment rose across the board, withparticularly notable growth in ‘other mining’, which includes lithium andsome other critical minerals (Figure 1.8).
Expenditure for buildings and structures rose by 4% in the June quarter,
while investment in equipment, plant and machinery edged back by 1%(Figure 1.9).
Spending on plant and machinery has accounted for a steadily rising shareof total investment spending since 2017, but spending on buildings andstructures is now growing steadily.
Figure 1.8: Mining capex by commodity, not seasonally adjusted

Forward expectations suggest that total mining industry investment in2023–24 will be little changed (Figure 1.10). The third estimate for2023–24 suggests the mining industry will invest $47 billion during thefinancial year. This is around 10% higher than the second estimate for2023–24.
The latest data on investment among individual commodities shows ‘othermining’ (including lithium) is undergoing rapid growth in capital spending,and this may be driving the recent upward revisions to future spending
estimates across the mining sector.
Workforce shortages appear to be easing, and inflation in construction
costs appears to be coming down. This should assist investment over theoutlook period.
Figure 1.9: Mining industry capital expenditure by type, quarterly
25

5

20

4

15

3

10

2

5

1

A$ billion

15

A$ billion

1296

A$ billion

18

3
0
2013

2015

2017

Oil and gas extraction
Coal mining

2019

2021

2023

Metal ore mining
Other mining

Notes: Other mining includes non-metallic mineral mining and quarrying and exploration andother mining support services; chart data is in nominal, original terms

0
2005

2008

2011

Buildings & structures

2014

2017

2020

2023

0

Equipment plant & machinery (rhs)

Notes: Chart data is in nominal terms, seasonally adjusted.
Source: ABS (2023) Private New Capital Expenditure and Expected Expenditure, 5625.0

Source: ABS (2023) Private New Capital Expenditure and Expected Expenditure, 5625.0

Resources and Energy Quarterly September 2023

11

2.5

80

24

2.0

60

18

1.5

12

1.0

20

6

0.5

0

0.0
0
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

A$ bilion30$ billion

100

40

2013–142015–16

2017–18
2019–202021–22
ActualExpected

2023–24

Notes: Chart data is in nominal terms
Source: ABS (2023) Private New Capital Expenditure and Expected Expenditure, 5625.0

Exploration expenditure (adjusted for inflation) edged down to $952 million
in the June quarter 2023. In trend terms, exploration is rising, encouraged
by relatively high commodity prices and the need for minerals vital to theglobal energy transition (Figure 1.11).
Industries recording significant growth in exploration expenditure include
iron ore (up by 31% in the June quarter), copper (up by 30%), gold (up by14%), nickel (up by 7%), and ‘other minerals’ (up by 13%), which includes
lithium, other base metals and other metals (Figure 1.12).
Exploration spending is a leading indicator of broader capital investment,
and recent growth suggests interest is rising in base metals and criticalminerals following recent strong price outcomes. Given the typical lags
involved, we could expect capital spending by resource and energy
companies to continue to lift over the next few years.

Mining capex, chain volume measures

A$ billion

Figure 1.11: Mining capital expenditure vs exploration (real, quarterly)

Figure 1.10: Mining industry capital expenditure, fiscal year

Exploration (rhs)

Source: ABS (2023) Private Capital Expenditure Survey, Chain Volume measure, 5625.0

Figure 1.12: Shares of exploration expenditure by commodity type
80%

60%

40%

20%

0%
2003

2008
2013
Base and other metals
Petroleum
Coal

2018
Gold
Iron ore

2023

Source: ABS (2023) Private Mineral and Petroleum Exploration, 8412.0

Resources and Energy Quarterly September 2023

12

1.7

Revisions to the outlook

The forecast for Australia’s resources and energy exports in 2023–24 is$10 billion higher than the forecast contained in the June 2023 Resources
and Energy Quarterly. The forecast for 2024–25 (nominal prices) is$8 billion higher than the same report (Figure 1.13). The 2023–24
revisions have largely been driven by a stronger than expected iron ore
price and the impact of a weaker than expected exchange rate against the
US dollar (AUD/USD).

A$ billion

Figure 1.13: Resource and energy exports, by forecast publication
475

475

450

450

425

425

400

400

375

375

350

350

325

325

300

2020–212021–22
ActualJun–23 forecast

2022–23

2023–24
2024–25
Mar–23 forecast
Sep–23 forecast

300

Source: Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

13

Figure 1.14: Australia’s major resources and energy commodity
exports, nominal

Iron ore
LNG

A$71b
A$63b

Thermal coal

A$62b
A$47b
A$41b

Metallurgical coalvalue

volume

EUV

value

Iron ore A$124b













A$99b

3

-6

-3

1

-19

-17

A$120b

LNG
A$92b
Thermal coal
Metallurgical coal

Crude oil

A$13b
A$15b
A$12b

Crude oil

Copper

A$12b
A$12b
A$13b

CopperAlumina

A$8b
A$9b
A$9b

Alumina

Aluminium

A$5b
A$5b
A$5b

Aluminium

Nickel

A$5b
A$4b
A$5b

Nickel

Zinc

A$4b
A$4b
A$4b

Zinc

0

20
2022–23

40

60

80

2023–24 f

2024–25 f

EUV

Lithium

A$20b
A$18b
A$16b

Lithium

2023–24 fvolume

Gold

A$24b
A$24b
A$22b

Gold

$A billion

A$66b

A$36b
A$28b

Annual per cent change

100

120













0

-23

-23

-3

-9

-12













11

-50

-45

0

-22

-21













10

-31

-24

0

-13

-13













16

-15

-1

0

-9

-10













-1

-11

-12

22

-26

-10













5

5

10

-7

-12

-18













5

-4

1

3

-1

2













6

0

6

2

-3

-1













-2

-6

-7

0

-2

-2













8

-20

-14

11

-4

6













4

-19

-16

5

-1

3

140

2024–25 f

Notes: f forecast; s estimate. EUV is export unit value.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

14

Table 1.1: Outlook for Australia’s resources and energy exports in nominal and real terms
Exports (A$m)

2021–222022–23

2023–24f

2024–25f

2021–222022–23

2023–24f

2024–25f

Resources and energy

421,691

466,737

399,981352,336

36.7

10.7

–14.3

–11.9

– realb

469,739

485,784

399,981341,210

30.9

3.4

–17.7

–14.7

Energy204,056

239,023

175,415150,023

151.2

17.1

–26.6

–14.5

b

– real

227,306

248,778

175,415

145,286

140.5

9.4

–29.5

–17.2

Resources

217,635

227,713

224,566

202,312

–4.2

4.6

–1.4

–9.9

– real242,433

237,006

224,566

195,924

–8.3

–2.2

–5.2

–12.8

b

Notes: b In 2023–24 Australian dollars; f forecast; g growth rate on 2022-23 levels.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department of Industry, Science and Resources (2023)

Table 1.2: Australia's resource and energy exports, selected commodities
PricesUnit

2022–23

Export volumes

2023–24f

2024–25f

Export values, A$b

Unit

2022–23

2023–24f

2024–25f

2022–23

2023–24f

2024–25f

Iron ore

US$/t

95

92

80

Mt

895

920

933

124

120

99

LNG

A$/GJ

21.4

16.6

15.1

Mt

82

81

79

92

71

63

Thermal coal

US$/t

302

144

124

Mt

182

202

203

66

36

28

Metallurgical

US$/t

278

232

213

Mt

157

172

172

62

47

41

Gold

US$/oz

1,831

1,914

1,851

t

228

265

265

24

24

22

Lithium

US$/t

5,174

3,119

2,254

Kt

3,333

3,316

4,031

20

18

16

Crude oil

US$/bbl

87

88

83

Kb/d

282

295

274

13

15

12

Copper

US$/t

8,289

8,284

8,649

Kt

853

899

928

12

12

13

Alumina

US$/t

343

340

350

Kt

16,566

17,494

17,788

8.3

8.8

8.7

Aluminium

US$/t

2,333

2,336

2,453

Kt

1,441

1,418

1,419

5.3

4.9

4.8

NickelUS$/t

23,911

19,863

20,875

Kt

161

174

192

5.0

4.3

4.5

Zinc

US$/t

2,981

2,488

2,592

Kt

1,247

1,298

1,358

4.3

3.6

3.7

Uranium

US$/lb

51

61

63

t

5,485

5,855

6,060

0.8

1.0

1.0

Notes: a Export data covers both crude oil and condensate; f forecast; s estimate. Price information: Iron ore fob (free-on-board) at 62 per cent iron content estimated netback from Western
Australia to Qingdao China; Metallurgical coal premium hard coking coal fob East Coast Australia; Thermal coal fob Newcastle 6000 kc (calorific content); LNG fob Australia's export unit values;
Gold LBMA PM; Alumina fob Australia; Copper LME cash; Crude oil Brent; Aluminum LME cash; Zinc LME cash; Nickel LME cash; Lithium spodumene ore.
Source: ABS (2023) International Trade in Goods and Services, Australia, Cat. No. 5368.0; LME; London Bullion Market Association; The Ux Consulting Company; US Department of Energy; Metal
Bulletin; Japan Ministry of Economy, Trade and Industry; Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

15

16



Summary
The balance of risks surrounding the global macroeconomic outlook
have deteriorated slightly since the June 2023 Resources and Energy
Quarterly. While the core outlook for global growth has improved, there
is a mounting risk China’s growth could be weaker-than-expected.

Continued tight fiscal and monetary conditions in most major economies
are expected to further slow global growth over H2 2023 and into 2024.



Slowing growth in the Chinese economy is due to a combination of
cyclical and structural factors. Box 2.1 explores three key structural
challenges to China’s growth outlook.

2.2

World economic outlook

Tighter fiscal and monetary conditions weighing on global growth
The International Monetary Fund (IMF) forecasts the world economy togrow by 3.0% in both 2023 and 2024, then rising to 3.2% in 2025
(Figure 2.1). Compared to the April 2023 World Economic Outlook, thisrepresents an upward revision of 0.2 percentage points for 2023 but nochange for 2024 and 2025.
The IMF continues to expect a notable divergence to emerge over the next
two years between the performance of advanced and emerging
economies. After recording growth below the global average in 2022 — forthe first time in over 40 years — the IMF expects China’s economy to growby over 5% this year. However, the US and European economies are
expected to slow in 2023, under the weight of tighter monetary policy.
Whilst global growth forecasts have been revised upward due to stronger
than expected consumption growth over the June quarter 2023 in mostadvanced economies, additional downside risks to the global outlook haveemerged in recent months. Headline inflation has continued to moderate inmost economies this year — due to lower energy and food prices — but
there has not been a sufficient decline in core inflation.
Despite still-tight labour markets, reduced consumption in advanced
economies — due to inflation and tighter monetary policy — is driving
Resources and Energy Quarterly September 2023

Figure 2.1: GDP growth forecasts
6
Annual per cent change

2.1

5
4
3
2
1
0

World

China
2022 2023

United States
2024 2025

Euro Area

Source: IMF (2023)

expectations for slower global growth over the remainder of the year.
Weaker consumer demand for goods relative to services in the US andEurope will also weigh on the economic growth of manufacturing exporters— including China, Japan and Korea.
The IMF notes that tighter monetary policy is a key risk to the outlook if
inflation pressures, particularly in services, prove more persistent than
expected. This could lead to the emergence of further financial sector
vulnerabilities, tightening global financial conditions. Additional sources ofglobal economic vulnerability include possible escalations in the Ukraine
war, geopolitical fragmentation and increasing trade restrictions.
An additional risk the IMF has emphasised is the potential for China’s
economic recovery to disappoint if the contractions of its property sector
and consumer demand continue. China’s recent economic data releases
have been weaker than was expected earlier this year with near-zero
inflation, weak investment and construction activity related to its property
sector. Longer-term, structural challenges to China’s growth outlook are
discussed in Box 2.1, while shorter-term, cyclical drivers of China’s growth
are discussed in the Major trading partners’ economic outlook section.
17

Global industrial production and trade weaken as orders drop
Global industrial production (IP) declined over the June quarter 2023, but
was 1.0% higher year-on-year. Quarter-on-quarter declines were driven by
the slowing of China’s economic rebound and the continued contraction in
Europe’s industrial sector. World IP growth remained positive year-on-year
due to increasing US industrial output and base effects — given COVIDrelated declines for China in June quarter 2022.
Global merchandise trade volumes declined in the June quarter 2023 to be
1.8% lower year-on-year (Figure 2.2). Weaker demand for goods inadvanced economies, especially electronic equipment, has driven exports
from Japan, South Korea and emerging Asia lower year-on-year.
Forward indicators of manufacturing activity indicate a contraction so far in
2023. The JP Morgan Global Manufacturing Purchasing Managers Index(PMI) was 49 in August 2023, and has remained in contractionary territory(less than 50) since September 2022.
30

55.0

20

52.5

10

50.0

47.5
Aug-20 Feb-21 Aug-21 Feb-22
Manufacturing PMI
Merchandise trade (rhs)0-10Aug-22 Feb-23 Aug-23
Industrial production (rhs)

Notes: PMI data is up to August 2023; IP and trade data only available to June 2023.
Source: IHS Markit (2023); CPB Netherlands Bureau for Economic Policy Analysis (2023)

Resources and Energy Quarterly September 2023

As headline inflation pressures ease, the focus shifts to core inflation
While headline inflation measures have continued to decline, persistentcore inflation remains a concern for the pace of further declines, with
inflation still well above most central bank targets. US inflation, forexample, measured 3.6% in August 2023, after declining to a 2-year low of
3.0% in June 2023 (Figure 2.3). US core inflation — which excludes foodand energy — has been slower to decline as housing and consumer
service inflation were above 6% until June 2023. Eurozone inflation, whilestill high, has declined notably from its peak in October 2022, due largely
to falling energy prices this year.
Figure 2.3: Consumer Price Indices — US, Europe and OECD
12
10

Annual percentage change

57.5

Annual percentage change

Index (50 = neutral)

Figure 2.2: World industrial production, trade and PMI

Global manufacturing activity has declined through the middle of 2023 due
to weakening activity in Asia and a sharp downturn in the European
manufacturing sector. Global manufacturing orders declined in August,signalling a further deterioration in the demand for goods — linked topressures from inflation and monetary policy — as well as a postpandemic preference for services consumption.

8
6
4
2
0
-2
Aug–19Aug–20
Aug–21
Aug–22
Aug–23
US Energy
US Food
US Goods (Ex Food & Energy)
US Services (Ex Food & Energy)
Euro Area (Headline)
OECD (Headline)

Source: Bloomberg (2023); Board of Governors of the Federal Reserve System (2023); U.S.
Bureau of Economic Analysis (2023); OECD (2023)

18

On the other hand, Eurozone core inflation in August was only 0.4% below
its peak of 5.7% in March 2023.

economies, underpinning Australian resource and energy export earnings
over the outlook period.

In July 2023, the IMF forecast global inflation would fall from 8.7% in 2022
to 6.8% in 2023 and 5.2% in 2024. Compared to the April 2023 outlook,the forecast for 2023 was revised down by 0.2 percentage points, largely
based on low inflation in China. The forecast for 2024 was revised up by
0.3 of a percentage point due to higher-than-expected core inflation.

Weakening balance of risks facing China’s growth outlook

According to the IEA, global investment in clean energy is expected toreach US$1.74 trillion in 2023, bringing total energy investment in 2023 to
US$2.8 trillion. Annual clean energy investment has risen by 53% from
5 years ago, when investment in clean energy and fossil fuels was roughly
equal. Recent growth in clean energy investment has been dominated byadvanced economies and China, collectively accounting for 90% of thegrowth since 2021.
This growth in clean energy investment has increased demand for many
non-ferrous and critical minerals, of which Australia has abundantresources. As a result, non-ferrous and critical minerals accounted for thelargest share (43%) of Australian mineral and petroleum exploration
expenditure in 2022–23. Ongoing investment into clean electrification,transmission and energy storage will continue to underpin additional
demand for Australian non-ferrous metals and critical minerals over the
medium- and long-term.

2.3

Major trading partners’ economic outlook

The outlook for Australia’s major trading partners remains weak, with their
GDP growth in 2023 forecast by the RBA in August to be around 3.25%,
well below its pre-pandemic decade average and lower than the May 2023
forecast. Slower growth in Australia’s major trading partners is expected toreduce demand for Australia’s exports. With that said, the IMF expects arecovery in China’s economy and ongoing development in India tocontribute about half of global economic growth this year. Growth fromthese key markets should support growth in their trade partners’
Resources and Energy Quarterly September 2023

To date in the September quarter 2023, key indicators of economic growth
have remained subdued, though an uptick in latest figures suggest China’s
slowing growth may be stabilising under government stimulus measures.
Retail sales grew by 4.6% year-on-year in August, accelerating from 2.5%
Figure 2.4: China contributions to quarterly real GDP
20
Annual per cent change

Global clean energy investment driving additional commodity demand

China’s economy grew by 0.8% in the June quarter 2023, with GDP 6.3%
higher year-on-year (Figure 2.4). Fixed asset investment in infrastructure
and manufacturing was a key driver of China’s economic growth in thisperiod. GDP was affected by weakness in the property sector andsoftening global demand for manufactured goods, with exports falling forthe fourth straight month by 8.8% year-on-year in August. The strong
rebound in consumption demand — following the relaxation of COVIDrelated restrictions — has faded since the March quarter 2023, raisingconcerns over China’s growth expectations for the rest of the year.

15
10
5
0
-5

Dec-20Jun-21
Consumption

Dec-21
Jun-22
Dec-22Jun-23
Investment
Net Exports
GDP

Notes: Consumption is made up of both household and government sectors.
Source: Bloomberg (2023); National Bureau of Statistics of China (2023)

19

growth in July, but remained below historical consumption levels. China’s
growth in industrial production rose from 3.7% in July to 4.5% in August,the strongest rate since April 2023. The Caixin General Manufacturing
Purchasing Managers’ Index (PMI) rose to 50.1 in August, signalling thesector’s return to expansion after a slump in July. Output growth increased
but continued to be offset by a decline in new export orders. Businesssentiment, while positive, fell to an 11-month low amid concerns over weakdomestic and foreign market conditions.
The official manufacturing PMI, which is more orientated to large
businesses, indicated a fifth consecutive month of contraction, with amoderating decline in sales. Notably, the official PMI reading for theservices sector fell from 51.5 to 50.5, its lowest rate since China’s
economic reopening. The construction index rose to 53.8 in August,following four months of decline, suggesting increased infrastructure
spending by local governments.
Despite positive signs in the March quarter 2023, the recovery of China’s
property sector has taken a deepening downturn in recent months. Yearto-date growth in property investment declined to 8.8% year-on-year inAugust 2023. Floor space of newly started residential property declined by
25% year-on-year in August 2023, while residential property sales year-todate fell by 1.5% year-on-year. Financial stability concerns haveheightened as Evergrande — formerly China’s second largest and now
heavily indebted property developer — has filed for bankruptcy and thecountry’s largest developer Country Garden may be at risk of default on its
bond payments. Adding to this, consumer credit growth has remained
subdued, posing a downside risk to near-term improvements in the sector.
Following efforts to support the economy throughout 2022 and in the
March quarter 2023 (see March 2023 Resources and Energy Quarterly),
Chinese authorities have further loosened monetary policy to support theannounced 2023 GDP growth target of 5%. In addition to loan rate cuts,
the People’s Bank of China (PBoC) introduced lower minimum mortgage
rates and down payment requirements in August. In September, the PBoC
reduced reserve requirement ratios for the second time in 2023.
Resources and Energy Quarterly September 2023

The IMF forecasts Chinese GDP growth of 5.2% in 2023, reflecting
improved mobility compared with COVID-related disruptions in 2022. It is
anticipated that growth will be powered by continued infrastructure
investment and further supportive fiscal and monetary policy measures.
The IMF forecasts growth to decline to 4.5% in 2024 and 4.1% in 2025, inline with a long-term trend towards structurally lower growth.
Japan and South Korea facing weaker external demand
Japan’s GDP increased by 1.5% in the June quarter 2023, resulting in
2.1% growth year-on-year. Net exports were the key driver of the strong
quarterly growth result, with exports increasing by 3.2% while imports
declined for a third consecutive quarter. Private consumption declined by
0.5% quarter-on-quarter due to cost pressures on consumers — forexample, food inflation averaged 8.5% over the June quarter 2023. Gross
fixed capital formation increased by 3.2% year-on-year, due mostly tostrong growth in September quarter 2022 and March quarter 2023.
Slowing growth in Japan’s major trading partners is a key issue for its
economy, particularly its industrial sector. Japanese industrial production
tracked flat year-on-year in June 2023, recovering from 6 months ofannual declines that ended in April. Machinery orders have, on average,
decreased at an annual rate of 7.0% since October 2022 (Figure 2.5).
The Jibun Bank Japanese Manufacturing PMI was unchanged at 49.6 inAugust, marking 7 months of contraction so far in 2023. The contraction in
manufacturing activity was driven by declines in new orders and output,
amid cooling demand both domestically and internationally. Businesssentiment remained high as surveyed firms expect demand conditions toimprove as COVID- and inflation-related impacts subside. However,confidence levels have fallen since the June quarter 2023.
Japan’s core inflation — which excludes fresh food but includes fuel costs— was 3.1% in July 2023, still exceeding the Bank of Japan (BoJ) inflation
target of 2%, but down markedly from 4.2% in January.

20

Figure 2.6: South Korea contributions to quarterly real GDP
60

14.0

20

40

10.5

10

20

0

0

-10

-20

-20

-40

-30
2013

-60

2015

2017

Industrial production

2019

2021

2023

Japanese machinery orders (rhs)

Source: Bloomberg (2023)

The BoJ has maintained its accommodative monetary policy andcontinues to target the 10-year Japanese Government Bond yield at 0%,
now with an allowance for yields to exceed 0.5% before intervening.
Looking ahead, the IMF forecasts Japan’s economic growth to rise to 1.4%
in 2023, on the back of pent-up demand and supportive fiscal andmonetary policy. As the effects of past stimulus efforts fade, Japan’s
economic growth is expected to slow to 1.0% in 2024, before slowing
further to 0.6% in 2025.
South Korea’s GDP grew by 0.8% year-on-year in the June quarter 2023,
the lowest annual growth rate since December quarter 2020. Annual
growth was supported by positive contributions from private consumption
and gross fixed capital formation. Net exports were a key dampener on
growth, with weaker exports and stronger imports driving a 16% year-onyear decline in the country’s trade balance (Figure 2.6).

Resources and Energy Quarterly September 2023

Annual per cent change

30

Annual per cent change

Annual per cent change

Figure 2.5: Japan industrial production and machinery orders

7.0
3.5
0.0
-3.5
-7.0
Jun-21

Dec-21

Jun-22

Private consumption
Gross fixed capital formation
Imports

Dec-22Jun-23Government consumption
Exports
GDP

Source: Bloomberg (2023)

South Korea’s industrial production declined in the month of June 2023 tobe 5.6% lower year-on-year. While output of semiconductors rose by 3.6%
over the month, production of automobiles and oil refining both fell by over
10%. Exports of semiconductors declined by over 33% year-on-year in
July, due to declining global demand. South Korea’s manufacturing PMI
declined in August to remain in contraction territory for a 14th consecutive
month. The negative August result was due to declines in output and neworders, due to weak domestic and global demand. Positive signs emerged
for business sentiment as employment growth was stable and the yearahead production outlook improved to its best in over a year.
In July, the IMF forecast South Korean economic growth of 1.4% in 2023
— a slight downward revision from April — and 2.4% in 2024. In April, theIMF noted that the downturn in the technology cycle is expected to erode
the nation’s growth momentum in the short-term.

21

Resilient US labour market and strong investment supporting growth
In year-on-year terms, the US economy grew by 0.9% in the June quarter
2023, driven strongly by 0.6% quarter-on-quarter growth. This growth was
driven by personal consumption of goods and services, though goods
consumption growth has eased in 2023. Net exports contributed positively
to US GDP growth, as exports rose by more than imports (Figure 2.7).
A notable source of recent growth has been private non-residential
investment, which rose by 4.6% year-on-year in the June quarter 2023.
Annualised US private investment in manufacturing structures rose by
69% year-on-year in the June quarter 2023, driven by sharp growth incomputers, electronics and electrical manufacturing. Major policies suchas the US Inflation Reduction Act (IRA) and the CHIPS & Science Act
have provided strong incentives for investment into clean energy andsemiconductor manufacturing within the US. Macquarie Research reported
about US$269 billion of private sector investment plans relating to clean
energy — namely EVs and batteries — have been announced since the
US IRA was enacted. Another US$231 billion of manufacturing investment
in semiconductor/electronics production was associated to the CHIPS Act.
Figure 2.7: US contributions to quarterly real GDP

Annual per cent change

25

US labour market resilience continues, with the unemployment rate
remaining low at 3.8% in August 2023. However, employment growthappears to have slowed in recent months, with nonfarm payroll
employment rising by 187,000 in August 2023, below the average monthly
increase of around 257,000 over the past 12 months.
The resilient US labour market continues to support spending, with retailtrade showing improved growth through the middle of 2023. Total inflationadjusted spending on goods and services increased month-on-month inJune 2023, to be 2.3% higher year-on-year. Advance indicators for
inflation-adjusted retail sales in July suggest retail trade also increased
over the month to be flat when compared year-on-year. Strength in theretail trade outlook has supported the ongoing narrative for the US
economy to avoid recession.
In July 2023, the IMF upgraded its forecast for US economic growth in2023 by 0.2 percentage points to 1.8% on account of resilient consumption
and ongoing labour market tightness. The resolution of US debt ceilingtalks and easing concerns over banking sector turmoil, have improved thebalance of risks facing the US economy. Growth is still forecast to ease to
1.0% in 2024, with tightening monetary and financial conditions expected
to slow private consumption — reducing labour market tightness andmoderating wage growth.

20
15
10
5
0
-5

US industrial production declined by 0.2% year-on-year in July 2023, witha sizeable 1.0% month-on-month increase offset by weaker growthpreviously. The US Manufacturing PMI remained in contractionary territory
at 47.6 in August, bringing the contraction in the US manufacturing sector
to a 10th consecutive month. The continued deterioration in
manufacturers’ operating conditions reflects sharp falls in new orders as
both domestic and external demand weaken.

Jun-21
Dec-21
Personal consumption
Net exports
GDP

Jun-22
Dec-22Jun-23
Private investment
Government consumption

Source: Bloomberg (2023)

Resources and Energy Quarterly September 2023

Eurozone economies face slower growth, manufacturing downturn
Eurozone GDP growth was 0.3% over the June quarter 2023, after zero
growth in the March quarter 2023. This brought GDP growth to 0.6% yearon-year, its weakest since the 2020–21 recession. Among the larger
economies, Spain grew by 0.4% over the quarter, while France grew by22

0.5%. Italy’s economy unexpectedly contracted by 0.3% over the quarter,
while Germany’s economy did not grow — bringing its annual GDP growth
to -0.2%.
In August 2023, the Eurozone Composite PMI Index decreased to 46.7,
signifying the worst slump in private sector activity since November 2020
(Figure 2.8). The third consecutive month of decline reflected a further
deterioration in manufacturing conditions and the contraction of theservices sector for the first time in 2023.
Industrial production in the Eurozone declined by 2.2% year-on-year in
July 2023. Declining durable and capital goods production month-onmonth offset continued increases in energy production. Industrial
production in major producer Germany was down by 0.8% month-onmonth.
Figure 2.8: Eurozone composite and manufacturing PMIs

In its July update, the IMF forecast Euro Area growth to be slightly higher
than previously expected: at 0.9% in 2023 and 1.5% in 2024. In line withcurrent economic conditions, growth in services- and tourism-driven
economies (such as Italy and Spain) was revised up, while the weakoutlook for manufacturing resulted in a downgrade to growth in Germany(now -0.3% in 2023).
India’s GDP growth to be relatively resilient70

India’s GDP growth increased to 7.8% year-on-year in the June quarter
2023, up from 6.1% in the March quarter. This annual growth figure was inline market expectations and was driven by strong growth in consumption
expenditure and fixed capital formation.

60
50
Index

The Eurozone manufacturing PMI recorded a reading of 43.5 in August,with declines in output, new orders, employment and purchasing activity.
Within this, Germany’s manufacturing sector continued its deepest
contraction since May 2020 with a PMI reading of 39.1 in August. This
reflected a deterioration in demand conditions, with output and demandfacing their sharpest contractions since the Global Financial Crisis(excluding pandemic- and lockdown-affected months). Declining input
prices and weak demand led to a third month of discounting final products
and the strongest decline in output prices in almost 14 years.

40

India’s manufacturing PMI continued to be strongly expansionary inAugust 2023 at 58.6. Accelerated growth was reported in both output andnew orders, with manufacturers citing strong demand conditions. Surveyed
firms broadly expected demand to remain elevated over the next year,
citing increasing new order commitments in the coming months.

30
20
10
0
Sep-20Mar-21

Sep-21

Mar-22Eurozone composite PMI
Germany manufacturing PMI
Source: Bloomberg (2023)

Resources and Energy Quarterly September 2023

Sep-22Mar-23Eurozone manufacturing PMIThe IMF forecasts India’s economic growth to slow to 6.1% in 2023,
revised up from 5.9% in April, due to stronger-than-expected domestic
investment. Growth is down from 7.2% in 2022 as domestic demand ispressured by tighter monetary policy. Growth is expected to pick up to
6.3% in 2024. From 2024 onwards, household spending is expected topick up as pressures from inflation and monetary policy ease.

23

Box 2.1: Structural challenges to Chinese growth

Exchange rate assumption revised lower
Over the past quarter, the Australian dollar has fallen slightly relative to the
US dollar but held constant on trade-weighted terms (Figure 2.9).
The AUD/USD exchange rate assumption has been revised lower by
US$0.02 in 2023 and US$0.03 in 2024 compared with the June 2023
Resources and Energy Quarterly, in line with changes in market
consensus (surveyed by Bloomberg) on the outlook for the exchange rate.
The median consensus on 27 August 2023 for the AUD/USD exchange
rate was an average of US$0.67 during the second half of 2023, US$0.70
in 2024 and US$0.74 in 2025.
70

0.9

65

0.8

60

0.7

55

50
2018

0.6

2019

2020

2021

AUSTWI
Source: Bloomberg (2023)

2022

AUDUSD (rhs)

2023

0.5

US$

Index (May 1970 = 100)

Figure 2.9: Australian trade-weighted index and AUD/USD

In their 2022 Article IV Consultation report on China, the IMF forecast
China’s GDP growth to decrease below 4% over the medium-term due toweakening factors on both supply and demand in the economy (IMF,
2023a). Demographic headwinds have been compounded by declining
productivity growth and business dynamism, resource misallocation
through continued high investment in sectors with declining productivity,and foreign export markets close to reaching saturation.
China was the largest export market for Australian’s resources and energy
exports in 2021-–22, accounting for more than 35% of export earnings,
and it is also one of the largest consumers of energy and metals globally.
As such, Chinese demand has a strong influence on commodity prices, so
a weaker outlook for Chinese outlook implies weaker Australian’s export
earnings over the long term.
This box highlights 3 key structural drivers of declining growth potential for
China’s economy: (1) slowing demographics, urbanisation and residential
property sales, (2) a shift in growth towards domestic consumption andservices, (3) declining returns on investment and lower foreign investment.
China’ property market faces falling population and oversupply
China’s residential property sector is facing a substantial mismatch insupply and demand, driven by falling population, overinvestment, and afinancing model past its time. This fundamental mismatch in supply anddemand suggests the collapse in residential construction activity since2020 reflects a structural rather than cyclical decline, noting that the
decline was initially triggered by the introduction of the “three red lines”
policy in 2020 under the principle of “housing is for living in, not for
speculation”. This reduction in activity will weaken China’s commodity
demand, as its residential construction sector is a major end user ofcommodities such as steel and non-ferrous metals.
The slowdown in China’s residential construction sector has triggered abroader slowdown in other parts of the economy. China’s investment inresidential buildings was about 10% of its GDP in 2020 and the real estate

Resources and Energy Quarterly September 2023

24

Million people

Figure 2.11: China urban population growth
25

2.5

20

2.0

15

1.5

10

1.0

5

0.5

0

0.0

-5

-0.5

2010

2013
2016
2019
2022
Change in urban population
Total population growth (%, rhs)
Change in level of urbanisation (% point, rhs)

2025

Notes: The outlook for China’s population growth is adopted from the International Monetary
Fund’s World Economic Outlook (April 2023), while the outlook for China’s change in level ofurbanisation is produced by the Department of Industry, Sciences and Resources.
Source: DISR (2023); IMF (2023); World Bank (2023)

Chinese residential property investment ramped up even as urban
population growth began to fall from 2017. Chinese households
demonstrated a strong preference for investing in domestic property, as
Resources and Energy Quarterly September 2023

Figure 2.12: China residential construction by floor space
2.0

7.5

1.6

6.0

1.2

4.5

0.8

3.0

0.4

1.5

0.0

2010
2012
2014
2016
under construction (rhs)2018Starts

2020

Billion square metres

The property boom in China in the first two decades of the 21st century
was underpinned by a growing population and large-scale urban migration.
Between 2002 and 2018, the growth in China’s urban population was
stable at 20-22 million people each year (Figure 2.11). However, anapparent slowing in the rate of rural migration to cities, as well as a
slowdown in fertility rates to 1.1 births per woman in 2022, has slowed
overall urban population growth. In 2022, China’s urban population only
increased by 15 million and the outlook suggests urban population growth
will fall to 12 million by 2025.

other Chinese assets historically had poor returns and tight capital controls
restrict investing abroad (Glaeser et al., 2017). In 2017, housing wealthmade up 78% of all Chinese assets, compared to 35% in the United States(Rogoff and Yang, 2021). Much of this investment is funded by a prepayment model, where properties are sold off the plan and paid in full by
mortgage prior to completion. This resulted in a significant oversupply of
new dwellings. Between 2010 and 2020, on average there were 1.4 billion
square metres of residential construction starts each year, while only
0.7 billion square metres of residential construction was reportedly
completed. As a result, over the 12-year period, the floor space ofbuildings under construction has doubled (Figure 2.12) while urban
population growth fell by a third.

Bllion square metres

sector has been estimated through input-output modelling, including
construction, equipment, furnishing and real estate services, contributed
up to 29% of China’s final demand in 2016 (Rogoff and Yang, 2021).

0.0
2022
Completed

Source: National Bureau of Statistics of China (2011-2023)

The supply-demand imbalance is acute in small- to medium-sized ‘tier 3’
cities, which exclude cities given privileged administrative status asclassified by Rogoff and Yang (2023). Rogoff and Yang further estimatedthat residential construction in tier 3 cities accounted for 80% of thenational total in 2020, and that housing stock in tier 3 cities rose from 32 to
43 billion square metres between 2011 and 2020. Population growth intier 3 cities averaged -0.1% over the same period, driven in part by
accelerating population outflows.
25

When the Chinese property developer Evergrande defaulted on debt
obligations in 2021, house price declines in tier 3 cities were particularly
large. Rogoff and Yang (2023) estimates that from February 2021 to June
2022, house prices in tier 3 cities fell by almost 20%, while prices in tier 1
and 2 cities rose slightly, although it should be noted that prices are often
subject to regulation. Confidence in the sector fell, resulting in slowing
sales which triggered a liquidity crunch, as pre-sales made up the largest
source of financing for Chinese real estate developers between 2016 and2020 (Kemp et al., 2020). This resulted in a wave of defaults amongst
other builders and left work on many existing, often already paid for,projects to cease.
Apparent floor space abandonment before completion exceeded floor
space completed in 2020 and 2022, underlining the extent of China’s
property market downturn, although the magnitude may be partly due tostatistical discrepancies between the different measures (Figure 2.13).
Figure 2.13: Apparent abandonment vs completion, residential

Billion square metres

1.0
0.8
0.6
0.4
0.2
0.0

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Apparent abandonment before completion

Completed

Notes: Apparent abandonment before completion of residential floor space is estimated bysubtracting the change in floor space under construction from the difference between floor
space started and completed for each year.
Source: National Bureau of Statistics of China (2011-2023)

Resources and Energy Quarterly September 2023

China’s transition from real estate and manufacturing-led growth
A second structural trend is the slow decrease in the share of exports in
the Chinese economy over time. China’s integration into the global
economy is largely bedded down, and the export-driven, high growth eraof the Chinese economy has largely run its course. This occurred despite
relatively low per-capita income in China, but foreign markets are reachingsaturation, with China’s share in global manufacturing exports reaching
17% by 2016 (Deb et al., 2019). Growth is increasingly driven by domestic
consumption, and China’s industries are relying less on exports, with
exports of goods and services as a percent of GDP falling from 36% in2006 to 21% by 2022. New opportunities to export manufactured goods toforeign markets may diminish given global concerns around national
security and government policies focused on de-risking supply chains.
Services may not be able to replace manufacturing and real-estate led
growth in China. A large services sector in middle income countries has
been observed to lead to lower rates of economic growth (Bulman et al.,2014), and the services sector is less tradeable across borders. A
domestically focused Chinese manufacturing industry has shown someability to remain dynamic and innovative, but recent evidence remains
mixed. A notable example is recent success and technical advances inelectric vehicle production, largely driven by strong domestic demand andgovernment support. But as the size of the manufacturing sector
diminishes, so does its ability to drive a high level of economic growth.
China’s services sector has contributed more to GDP growth than its
manufacturing sector since 2011. Capital investment in real estate andinfrastructure has also driven growth, but the bulk of productive investmentin the space - particularly in real estate – is likely to be already complete.
Declining returns to investment and lower foreign investment
The third trend of note is a decline in Chinese productivity growth, related
to falling investment including foreign direct investment. China’s
investment — measured by gross fixed capital formation — peaked at justbelow 47% of GDP in 2011. Growth in fixed asset investment (FAI), hasbeen declining since that peak: from around 20% in 2013 to 3.4% in26

2023 year-to-date (Figure 2.14). This has coincided with declining private
sector investment and a rising share of FAI from state-owned enterprises(SOE). As SOE’s have been less productive than private companies,
declining private sector investment means decreasing capital productivity(IMF, 2023a). A further consequence of declining private sector activity
has been declining business dynamism, also linked to lower productivity.
65%

20

60%

15

55%

10

50%

5

45%

0

40%

-5

2013

2015
Total FAI

2017
2019
Private FAI

Figure 2.15: Quarterly FDI flows into and out of China
120

35%
2021
2023
Private share (rhs)

Notes: 2023 data is for January-July 2023.
Source: Bloomberg (2023); National Bureau of Statistics of China (2023)

Foreign direct investment (FDI) into China — which has traditionally been
considered a key channel of technology transfer — also fell substantiallybetween 2015 to 2022: by around 60% in selected strategic sectors (IMF,
2023b). This has intensified since mid-2022; FDI flows into China fell by
82% year-on-year in H1 2023 to be US$25.4 billion (Figure 2.15). Recent
declines in FDI align with weakening investment sentiment in Asia, driven
by factors such as rising interest rates, slowing global growth — especiallyin Asia’s export markets — and greater economic uncertainty.
Political factors may also work to lower FDI into China, including thewidespread desire to diversify supply chains. Analysis by Exante Data
indicates recent declines have largely been the result of multinational
companies repatriating their Chinese earnings, rather than reinvesting
their earnings within China.
Resources and Energy Quarterly September 2023

80
US$ billion

25

Share of total FAI

Annual per cent change

Figure 2.14: Fixed asset investment (FAI) in China

This could be indicative of fundamental shifts in investment or risk
sentiment, rising interest rates, or changing business conditions in China.
‘Greenfield’ investment has also declined, but to a lesser extent — year-todate utilised foreign capital fell 9.8% year-on-year in July 2023. Supporting
this analysis, some surveys suggest investment sentiment for US andEuropean businesses operating in China has declined notably over the
past year (AmCham 2023, EU Chamber of Commerce in China 2023).

40
0

-40
-80
2018

2019
Inward FDI

2020

2021
Outward FDI

2022

2023

Net FDI

Source: CEIC (2023); OECD (2023)

If foreign direct investment into China continues to fall or remain low,
structurally lower foreign investment will lead to lower economic growthand productivity going forward. The IMF has assessed that fragmentationof global FDI arising from geopolitical blocs could result in greater declines
in vertical (knowledge intensive) FDI flows globally, with permanent lossesof around 2% to Chinese GDP (IMF, 2023b).
Noting softer foreign direct investment flows recently, China’s StateCouncil in August issued 24 guidelines to optimise foreign investment.
These guidelines intend to increase protection of intellectual property
rights of foreign investors and encourage R&D activity within the country.
An increasingly complicated external environment could affect China’s
access to foreign investment and technical expertise going forward.
27

2.4

References for Box 2.1

AmCham (American Chamber of Commerce in China) (2023) China
Business Climate Survey Report, accessed 28 August 2023.
Bulman D, Eden M, and Nguyen H (2017) Transitioning from Low-Income
Growth to High-Income Growth: Is there a Middle Income Trap? ADBI
working paper No. 646.

Rogoff KS and Yang Y (2021) Has China’s Housing Production Peaked?
China and the World Economy 21 (1): 1-31.
Rogoff KS and Yang Y (2023) A Tale of Tier 3 Cities, accessed 28 August
2023, earlier version published as NBER working paper 30519, September
2022.

Deb P, Gjonbalaj A and Hannan SA (2019) The Drivers, Implications andOutlook for China’s Shrinking Current Account Surplus, IMF working paper
No. 2019/244.
European Union Chamber of Commerce in China (2023) European
Business in China Business Confidence Survey 2023, accessed 28
August 2023.
Glaeser E, Huang W, Ma Y and Shleifer A (2017) A Real Estate Boomwith Chinese Characteristics. Journal of Economic Perspectives Vol. 31,
No. 1, Winter 2017 (pp. 93-116).
IMF (International Monetary Fund) (2023a), People’s Republic of China:
2022 Article IV Consultation-Press Release; Staff Report; and Statementby the Executive Director for the People’s Republic of China, Washington
D.C.
IMF (International Monetary Fund) (2023b), World Economic Outlook: A
Rocky Recovery, Chapter 4: Geoeconomic Fragmentation and Foreign
Direct Investment, Washington D.C.
Kemp J, Suthakar A and Williams T (2020) China’s Residential Property
Sector, Reserve Bank of Australia Bulletin.
Mason AD and Shetty S (2019) A Resurgent East Asia: Navigating a
Changing World, World Bank East Asia and Pacific Regional Report,
Washington, D.C.
Nordvig J, Etra A, Rasmussen ML (2023) The Rise & Fall of Foreign Direct
Investment in China, Money: Inside and Out by Exante Data.

Resources and Energy Quarterly September 2023

28

Table 2.1: IMF annual GDP growth projections for major trading partners
2022

2023a

2024a

2025a

3.5

3.0

3.0

3.2

China c

3.0

5.2

4.5

4.1

Japan

1.0

1.4

1.0

0.6

South Korea

2.6

1.4

2.4

2.3

Indiad

7.2

6.1

6.3

6.2

ASEAN-5e

5.3

4.9

5.3

5.2

Eurozone

3.7

0.8

1.6

2.2

United States

2.1

1.8

1.0

1.8

World b

Notes: a Assumption. b Calculated by the IMF using purchasing power parity (PPP) weights for nominal country gross domestic product. c Excludes Hong Kong. d Based on fiscal years, starting in
April; e Indonesia, Malaysia, Philippines, Thailand and Vietnam.
Sources: IMF (2023) World Economic Outlook; Bloomberg (2023)

Table 2.2: Exchange rate and inflation assumptions

AUD/USD exchange rate

2022

2023a

2024a

2025a

0.69

0.67

0.70

0.74

8.0

4.4

2.8

2.1

2021–22a

2022–23a

2023–24

2024–25a

4.4

7.0

4.1

3.3

Inflation rateb
United States
Australia

Notes: a Assumption; b Average CPI growth over the specified year (fiscal or calendar).
Sources: ABS (2023) Consumer Price Index, 6401.0; Bloomberg (2023); Department of Industry, Science and Resources; RBA (2023); IMF (2023)

Resources and Energy Quarterly September 2023

29

30

31

3.1

SummaryGlobal steel demand has continued to slow, driven by China’s ongoingproperty sector weakness, as well as lower demand from European
manufacturing and construction.

Global steel producers are expected to face subdued demand andmoderating prices over the rest of 2023. Weak residential construction
and falling industrial output in advanced nations is likely to be only partly
offset by growth in infrastructure and non-residential construction
activity.



3.2

Many steel producers have already cut back production and global
production is expected to remain relatively subdued through 2023 andinto 2024. Steel production growth is expected to be strongest in
countries/regions such as India, South-East Asia and the Middle East.

World production and consumption

Global steel production facing weaker second half of 2023

An expected stabilisation and gradual pickup in growth in global industrial
production over the rest of the outlook period, particularly in late-2024, and2025, combined with further stimulus-related infrastructure projects is
expected to support stronger growth in steel demand. World steel
production is projected to grow by 1.7% in 2024 and 1.4% in 2025, toreach just under 2 billion tonnes by the end of the outlook period.
Over the next couple of years, growth in world steel production will besupported by substantial growth in new capacity — either underway orplanned — with projects in the pipeline in Asia, North America, Europe andthe Middle East.
Blast Furnace-Basic Oxygen Furnace steelmaking (favouring iron ore andmetallurgical coal as inputs) is expected to make up around 58% of new
global supply, and more than 85% of new capacity built in Asia over the
next few years.

Figure 3.1: Global monthly steel production
180

World steel production is expected to record year-on-year growth of 1.2%
in 2023. This predominantly reflects the comparatively weak global steel
production that occurred in the second half of 2022, which reduced fullyear growth substantially.

160

Chinese steel production in the second half of 2022 was heavily affectedby outbreaks of the COVID-19 pandemic and ongoing weakness in thenation’s residential property sector. Higher energy prices (resulting from
Russia’s invasion of Ukraine) also forced output cuts amongst large steel
makers — such as the EU, US, and Japan (Figure 3.2).
Subdued demand resulting from monetary policy tightenings by major
central banks over the past year — in response to rising/high inflation — isexpected to continue to adversely impact economic growth, andconsequently demand for steel, across most major economies over the
rest of 2023.
Resources and Energy Quarterly September 2023

Million tonnes

Global steel production in H1 2023 was around 950 million tonnes. While
this was at the upper end of the global (2017 to 2021) range, it was slightly
below the corresponding period in 2022 (Figure 3.1).

140

120

100

Jan Feb Mar Apr May Jun
2017-2021 range

Jul Aug Sep Oct Nov Dec
2022

2023

Source: World Steel Association (2023); DISR (2023)

32

Weak global industrial production in 2023 to weigh on steel demand
Growth in global industrial production — a key driver of steel consumption— is expected to remain weak for the remainder of 2023 as world
economic growth slows. Global industrial production growth was 0.5% in
July year-on-year, down from over 3% last year (Figure 3.2). This will likely
further dampen the recovery in global steel demand in 2023. Global steel
consumption is projected to grow by 0.5% in 2023, following a fall of 2.6%
last year.
25%

75

20%

70

15%

65

10%

60

5%

55

0%

50

-5%

45

-10%

40

-15%
2017

2018

2019

World steel production

2020

2021

World IP

2022

2023

PMI reading

Annual percentage change

Figure 3.2: World manufacturing PMI, IP and steel output

35

Manufacturing PMI (rhs)

Notes: JPMorgan Global Manufacturing Index; a reading above 50 indicating an overall
increase compared to the previous month, and below 50 an overall decrease
Source: World Steel Association (2023); S&P Global (2023); Bloomberg (2023)

Risks continue to be skewed to the downside. Contractionary monetary
policy across most major economies remains a key challenge, particularly
through its impact on private sector spending and residential investment.
Elevated energy prices continue to adversely impact steel demand andremain a key risk.
Global construction activity — representing about 50% of world steel
demand — continues to register modest growth. The Global Construction
Activity Index posted its third successive quarter of growth in the Junequarter. With higher interest rates dampening private sector residential
Resources and Energy Quarterly September 2023

activity, global construction continues to be driven primarily byinfrastructure. The Middle East and African regions registered thestrongest conditions, while activity deteriorated in a number of European
countries. Results for the Asia Pacific region were mixed. India recorded
its strongest construction outlook in 5 years. Finally, global credit
conditions have continued to deteriorate, pointing to a further tightening incoming months in the lending environment for new construction projects.
After sharp improvements in early 2023, global manufacturing activity has
since weakened, with the JP Morgan Global Manufacturing PMI reading at
49.0 in August. This was the 12th successive month in which conditions
have been in contractionary territory.
A further recovery is expected in the global auto industry over the rest of2023 and in 2024, despite ongoing challenges from supply chain
disruptions and slowing global growth. S&P Global Mobility forecasts a
4.0% increase (year-on-year) in units produced in 2023 driven by 2 yearsof pent-up-demand. However, a return to pre-pandemic production levels
is not expected until 2025 at the earliest. Recent improvements inavailability notwithstanding, semi-conductor shortages are expected toremain a challenge over the next few years. Weaker global auto demandremains a key risk over the next year.
China’s property sector weakness continues
Despite some promising signs in the March quarter 2023, the expectedstabilisation and turnaround of China’s now multi-year property sector
decline has not eventuated (Figure 3.3). As a result, demand for steel in
China has been weak, reducing Chinese steel mills’ profit margins. China’s
total steel output in the June quarter was below 2022 levels after strong
output growth in the March quarter (Figure 3.4).
However, other sources of demand have been supporting the Chinese
steel sector. These include strong growth in steel exports as well as
machinery manufacturing, automobile output, and white goods such as
fridges and washing machines for export. Chinese infrastructure
investment is also contributing — particularly investment in Chinese
railways, which is up 25% year-on-year in the 7 months to July 2023.
33

40

80

30

60

20

40

10

20

0

0

-10

-20

-20

-40

-30
2019

2020

2021
2022
2023
New home sales (rhs)
Fixed Asset Investment (real estate)
Under construction

Annual percentage change

Annual percentage change

Figure 3.3: China’s residential property sector pipeline-60

Notes: * Floor space reported on a cumulative calendar year basis in million squares metres.
China’s property data combines January and February monthly data (reported in February)
Source: NBS (2023); Bloomberg (2023)

110
100
Million tonnes

An uncertainty surrounding the rate of China’s steel output growth in 2023
is whether, and to what extent, the Chinese Government chooses to cap
steel production levels over the rest of 2023. Given the relatively strong
start to the year, if production caps were to be set at 2022 levels, thiswould imply sharp falls in production for the last quarter of 2023. A more
moderate production cap would see China’s 2023 steel output reach levels
above the weak 2022 result, but likely below the strong production levels
achieved in 2021.
Turning to the rest of the outlook period to 2025, China is projected to seea mild fall in steel production, with annual falls of 0.6% projected in 2024
and 2025. While China has nominated 2030 as its target date for peaksteel (output), the peak is expected to be achieved before that — asstructural factors temper steel demand (see Iron Ore chapter).

Figure 3.4: China monthly steel production

Infrastructure spending is expected to provide some support to China’s
economy in H2 2023. As much as RMB4.76 trillion (US$680 billion) in local
government special purpose bonds — primarily used for infrastructure
spending — were issued in 2022. Chinese authorities have also instructed
the various policy banks (the Agricultural Development Bank of China,
China Development Bank, and the Export-Import Bank of China) toincrease lending for infrastructure projects.

90
80
70
60
50

Overall, China’s steel production in 2023 is expected to be around 1.4%
higher than in 2022. This follows the sharp falls in Chinese steel
consumption last year due to China’s dynamic zero-COVID policy — which
substantially curbed industrial activity and domestic travel. The recovery in
Chinese steel consumption seen in the June quarter has also lost
momentum in recent months. China’s steel consumption in the 8 months
to August 2023 was 580 million tonnes, up 0.7% from the corresponding
period in 2022 (Figure 3.5).

Jan

Feb MarApr May Jun

2017-2021 range

Jul

Aug Sep

2022

Oct

Nov Dec

2023

Source: World Steel Association (2023); Department of Industry, Science and Resources(2023)

Resources and Energy Quarterly September 2023

As discussed in the Macroeconomic outlook chapter, Chinese monetary
policy has eased to support demand. While the lags involved in some ofthe policy changes should help underpin Chinese commodity usage in
2024, there is yet to be a meaningful pick up of credit growth in the
broader economy.
34

Figure 3.5: China’s monthly steel consumption

Bloomberg’s China’s Credit Impulse (measuring new loans compared withbroader GDP) returned to negative territory in the June quarter after
tentative signs of a recovery in late 2022 and early 2023 (Figure 3.6).

Annual percentage change

20
15

Russian invasion of Ukraine continuing to restrict global steel supply

10
5
0
-5
-10
2016

2017

2018

2019

2020

2021

2022

2023

China steel consumption (% change YoY)
Notes: Annual percentage change based on cumulative steel consumption April to Marcheach calendar year.
Source: Bloomberg (2023); NBS (2023)

Figure 3.6: China credit impulse

Annual percentage change

Russian steel output is also down, but by much less than Ukraine. Russian
output was up 3.9% in the year to August 2023 compared to thecomparable period in 2022 (Figure 3.10), but remains about 2% below
pre–invasion levels.
The war’s impact, including the broader sanctions, has posed a range ofchallenges for the Russian economy. Russia is diverting more exports ofiron ore and steel toward Asia and away from Europe due to EU sanctions.
Russian iron ore and steel exports to China and India rose sharply in
2022. Russian industrial production fell consistently for the first 12 months
following the invasion, with March 2023 marking the first positive growth(year-on-year) since February 2022. Russia’s June quarter industrial
production rose 6.3% year-on-year.

25
20
15
10
5
0

Ex-China steelmaking cut back in response to weaker demand

-5
-10
-15
2009

In the first half of 2023, Ukraine’s steel production was 2.8 million tonnes.
This represented a fall of around 38% (1.7 million tonnes) from the same
period last year, and a fall of 74% (8 million tonnes) compared to thecomparable period in 2021 (prior to the Russian invasion). The ongoing
war is delaying the process of rebuilding and economic recovery. Russia’scontrol of the Black Sea over the past year and strikes on improvised
supply chain networks, continue to restrict the export capability of major
Ukrainian steel producers. Any recovery in ferrous metal exports is
expected to be partial and will be played out over several years.

2011

2013

2015

2017

Source: NBS (2023); Bloomberg (2023)

Resources and Energy Quarterly September 2023

2019

2021

2023

Moderating global demand as economic growth slows, as well as higher
energy and input costs, continue to impact manufacturing activity across
many major economies. Industrial production has been particularly weak in
the EU, Japan and South Korea during 2023 (Figure 3.7).
The softening in global steel demand seen in the June quarter has
moderated slightly in some markets in recent months, with a slight pickup35

US prices for HRC have continued to ease in recent months following thestrong rebound in late 2022 and early-2023 — down to US$810 a tonne inAugust. US reinforcing bar (‘rebar’) prices have remained at high levels so
far in 2023, supported by infrastructure and non-residential commercial
construction. This has opened up a substantial price differential with othermarkets. Rebar prices have continued to ease in other major markets,
including China and southern Europe, but they remain above prepandemic levels (Figure 3.9).

Annual percentage change

Figure 3.7: Industrial production — EU, US, Japan and S Korea

Figure 3.8: HRC steel prices
2,000
1,500
US$ per tonne

in steel prices in China and a stabilisation in southern European markets in
July, particularly flat steel products such as hot-rolled coil (HRC)(Figure 3.8).

1,000
500
0
2018

US

2019

2020
China

2021

2022
2023
Southern Europe

25%

Source: Bloomberg (2023)

20%

All three broad areas of construction recorded falls in activity (housing,commercial and infrastructure). Residential construction recorded thebiggest fall in over three years, while commercial construction andinfrastructure declined at softer rates. New business orders fell sharply inAugust, the 17th consecutive monthly fall. Price pressures remain modest
due to reduced demand for inputs and greater material availability.

15%
10%
5%
0%
-5%
-10%
-15%
Jun-2021
EU

Dec-2021

Jun-2022

US

Japan

Dec-2022

Jun-2023

South Korea

Source: Bloomberg (2023)

European construction sector weakens again in the June quarter
Weakening demand has seen the Eurozone construction sector slide into
deep contraction over the past six months. The HCOB Eurozone
Construction PMI remained in negative territory in August 2023, for the
16th consecutive month. The August result was the sharpest fall inconstruction activity since late-2022.
Resources and Energy Quarterly September 2023

Slowdowns in construction activity were substantial and widespread
across Europe, with the steepest reductions in Germany and France.
Public construction works and government housing schemes are providing
some support to the sector. However, the outlook for European
construction over the next 6-12 months remains bleak, as higher interest
rates continue to hurt residential and commercial construction.
Steel output in the EU — the world’s second largest steel-producing region— fell by 11% year-on-year in the first half of 2023 (and remained 13%
below pre-COVID 2019 levels) to reach around 62 million tonnes. EU steel
production is forecast to see a modest rate of growth over the outlook
period to 2025, though production levels are forecast to remain below the
pre-pandemic peak. Most of the EU’s current or planned steel capacity
developments are aimed at replacement (rather than additional) supply,with a focus on the shift toward EAF-based, lower-emissions facilities.
36

Figure 3.9: Rebar steel prices

tonnes by 2030–31, more than 60 million tonnes of new steel production
capacity is expected to be added over the next few years. The $1.5 trillion
National Infrastructure Pipeline is expected to support growth in India’s
residential and commercial sectors to 2025, as well as a ramp up in
infrastructure spending. Sustained growth in private consumption is
expected to drive healthy growth in automotive and consumer durables.

1,200

US$ per tonne

1,000
800

South East Asia is also expected to see a substantial increase in total
steel output, with annual growth of around 10% expected over the outlook
period to 2025. New steel production capacity expected includes sizeable
projects in Vietnam, Philippines, and Malaysia.

600
400
200
0
2018

Japan and South Korean steel output contracted in H1 2023
2019
US

2020

2021

China

2022

2023

Southern Europe

Source: Bloomberg (2023)

India’s steel sector continues to build momentum
Indian steel output reached 68 million tonnes in the first half of 2023, a riseof 7.4% year-on-year (Figure 3.10). Total production is forecast to grow
6.8% in 2023 (to 134 million tonnes).
India’s economic outlook remains healthy, with strong demand for steel
expected from the manufacturing and construction sectors. As noted
above, India recorded its strongest construction outlook in 5 years. India’s
manufacturing PMI remained strongly positive in August, with strong
growth reported in both output and new orders. The manufacturing
demand outlook remains positive over the next year, with businesses
reporting rising future orders. However, the sharp rise in India’s inflation in
July to 7.4% — the highest level in 15 months and above the Reserve
Bank of India’s target range of 4-5% — raises the possibility of monetary
tightening if price pressures remain elevated.
India is projected to see some of the strongest growth in steel output
globally over the outlook period (Table 3.1). Following the Indian
Government’s target to double national production capacity to 300 million
Resources and Energy Quarterly September 2023

In the first half of 2023, steel output in Japan and South Korea contracted
by 4.7% and 0.5%, respectively. In Japan, despite strong GDP growth(2.1% year-on-year) in the June quarter 2023, the country’s manufacturingconditions remain subdued, due to slowing growth in its major trading
partners and cooling domestic demand. Industrial production was flat inJune following monthly declines through most of 2023. The Jibun BankJapanese Manufacturing PMI returned to contractionary territory in July,
with the decline driven by falls in new orders and output. Japan’s JFE
Steel Corporation stopped blast furnace production at the Keihin plant in
September. Over the outlook period to 2025, Japan’s steel production is
expected to remain flat (Table 3.1).
South Korea’s economy continues to slow, with GDP easing to growth ofjust 0.8% year-on-year in the June quarter. Net exports were a key factor
in the slowdown (down 16% year-on-year), and domestic industrial
production also declined (down 5.6% year-on-year in June).
With South Korean growth expected to slow further in H2 2023, a reboundin the nation’s steel output is expected to be very limited. The global
economic slowdown is forecast to continue to weigh on Korea’s exportoriented industries, while tightening monetary conditions are expected tofurther dampen residential construction activity. Over rest of the outlook
period, South Korean steel output is forecast to grow modestly (Table 3.1).

37

US factory construction surges while residential construction weakens
US steel production has been relatively weak so far this year. In the firsthalf of 2023, production was down 2.9% compared with the corresponding
period in 2022. This result reflects slowing industrial and manufacturing
activity. Manufacturing output fell 0.7% year-on-year in July 2023.
Similarly, annual growth in industrial production has steadily deteriorated:from rates of 3-4% in 2022 to falls in recent months — with July industrial
production down 0.2% year-on-year.
Inflationary pressures and tightening monetary conditions have weighed
on US construction activity — particularly the residential property sector.
But private non-residential investment has recorded strong growth. Real

manufacturing construction spending has doubled since end 2021, driven
by construction of computer, electronic, and electrical manufacturing.
The outlook for US steel demand in the second half of 2023 contains
downside risks. Residential construction is facing increasing headwinds
from rising interest rates and higher land and material costs. Government
initiatives such as the Inflation Reduction Act and the CHIPS Act should
support manufacturing activity. However, the US Manufacturing PMI
remained in contractionary territory in August. The ongoing deterioration in
manufacturers’ operating conditions reflects falls in new orders as
domestic and external demand weaken. US steel production is projected
to record moderate growth over the outlook period to 2025 (Table 3.1).

Figure 3.10: Steel production – other major producers
140
120

Million tonnes

100
80
60
40
20
0

European Union

India

Japan
2022

United States
2023f

RussiaSouth Korea

BrazilAugust year-to-date actual

Source: World Steel Association (2023); DISR (2023)

Resources and Energy Quarterly September 2023

38

Table 3.1: World steel consumption and production
Million tonnes
Crude steel consumption

Annual percentage change

2022

2023f

2024 f

2025 f

2023 f

2024 f

2025 f

China

965

965

967

961

0.0

0.2

-0.6

European Union

159

156

162

165

-2.1

4.0

2.0

India

118

122

129

138

3.9

5.4

7.6

United States

102

104

108

112

1.4

4.0

3.3

Other Asia

114

115

119

121

1.3

3.0

2.2

Japan

62

61

63

64

-1.2

3.7

1.4

Middle East

56

57

59

61

1.0

3.8

3.1

South Korea

54

53

54

55

-1.4

2.1

1.4

Russia

43

42

41

42

-1.9

-2.7

1.4

World steel consumption

1,895

1,904

1,943

1,971

0.5

2.1

1.4

Crude steel production

2022

2023

2024

2025

2023

2024

f

2025 f

1,018

1,032

1,026

1,020

1.4

-0.6

-0.6

European Union

136

129

134

135

-5.4

4.0

0.7

India

125

134

142

151

6.8

6.2

6.3

Japan

89

91

93

92

2.4

1.7

-0.7

United States

81

80

81

83

-1.3

2.1

2.6

Russia

71

73

74

74

2.6

1.0

0.1

South Korea

66

65

67

68

-1.0

3.3

1.4

Other Asia

66

67

76

85

2.0

12.1

12.0

1,885

1,908

1,941

1,968

1.2

1.7

1.4

a

China

a

World steel production

f

f

f

f

Notes: a Asia ex. China, India, Japan, South Korea and Taiwan; f Forecast; r Annual percentage change
Source: World Steel Association (2023); Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

39

40

41







4.2

Summary
Spot iron ore prices have been volatile in the September quarter, buthave generally moderated since the start of the year, driven by slowing
global economic growth and China’s property sector weakness.

steel production in China at the end of the June quarter following
weakness in April and May.

Figure 4.1: Iron ore price, monthly
250

Australian export volumes remain strong, with further greenfield supply
from established and emerging producers expected to come online in
the next few years.
Australia's iron ore export earnings are expected to decline from$124 billion in 2022–23 to $120 billion in 2023–24, and to $99 billion in
2024–25 — driven by lower prices over the outlook period.

PricesIron ore prices have been volatile in the September quarter
Iron ore prices have been volatile in recent months, with prices easingfrom the end of the June quarter, due to slowing global economic growth
and an expectation of slowing Chinese steel production over theremainder of 2023. Following a strong rebound in iron ore prices to a peakof over US$120 a tonne in the June quarter, the benchmark iron ore spot
price (basis 62% Fe fines CFR Qingdao) fell to around US$108 a tonne inAugust 2023 (Figure 4.1). The price fall reflected slackening demand from
Chinese steel mills.
Despite the worsening outlook for global steel demand, iron ore prices
strengthened again in September. The resilience in prices appears toreflect improved market sentiment due to the potential for new government
measures to support China’s economy.
More broadly across China, the recovery in steel consumption seen in theJune quarter has also lost momentum in recent months, with year-on-year
declines in steel consumption registered in June and July. This weakness
comes on top of the large falls in Chinese steel consumption in 2022.
Iron ore imports from Australia increased by 6.9% year-on-year in June
2023, following a fall of 6.1% in May (Figure 4.2). This reflects a pickup in

Resources and Energy Quarterly September 2023

200
US$ a tonne

4.1

150
100
50
0
2016

2017

2018

2019

2020

2021

2022

2023

Notes: China import Iron ore fines 62% Fe spot (CFR Tianjin port)
Source: Bloomberg (2023) China import prices

The Chinese property sector faces a number of challenges which include
demographic and structural components (see Box 2.1).
New infrastructure investment — resulting from substantial levels offunding allocated in 2022 — as well as new government policies intended
to alleviate property sector weakness, should provide support for
construction activity and hence steel and iron ore demand in China fromlate 2023 and 2024 (see Steel chapter).
Restocking of iron ore and steel inventories by Chinese steel mills is also
expected to provide some support for iron ore demand in coming months.
In late September, China’s portside iron ore inventories had fallen toaround 15% below historic averages (Figure 4.3). Reported inventories in
Chinese steel mills have also remained low compared with previous years,
with planned purchases by mills persisting at subdued levels in recent
months.

42

Figure 4.2: China’s iron ore imports, monthly

Figure 4.3: China’s weekly iron ore port stocks
180

120

160
140
120

Million tonnes

Million tonnes

100
80

100

60
40

80
60
40

20
0

20
2020

Other

2021
Brazil2022

Australia

2023

12 month moving average (Total)

0
2017

2018

2019

2020

Weekly port stocks

2021

2022

2023

5 year average

Source: Bloomberg (2023)

Source: Bloomberg (2023)

This is likely to reflect Chinese steel mill margins remaining weak due tolow steel prices in recent months. Steel margins reportedly moved backinto negative territory in early August. This likely contributed to acontinuation of the decline in spread for premium 65% pellet, as well as
maintaining downward pressure on premiums for high-grade iron ore fines,
as mills seek to reduce operating costs (Figure 4.4). However, winteroutput curbs to address emissions and oversupply expected from lateNovember may see a recovery in demand for higher grade ores as mills
seek to maximise output yield.

There are substantial risks to the global demand outlook. A more
pronounced global economic slowdown will exacerbate weak conditions inthe steelmaking sector. Slowing growth in the Chinese economy has tilted
the balance of risks towards the downside.

Following last year’s production falls, ex-China steelmaking is expected tomake a modest recovery in the second half of 2023. This pickup should
provide support for iron ore demand and prices. This is expected toinclude a rise in iron ore imports for major purchasers in Europe and North
America, as well as East and South-East Asia and the Middle East.

Resources and Energy Quarterly September 2023

The spot price for 62% Fe iron ore fines (FOB) for calendar 2023 isestimated to average around US$100 per tonne (Figure 4.5).
Prices to further moderate over outlook as global demand softens
China is projected to see a modest fall in total steel output over the outlook
period to 2025. As China accounts for almost 60% of global iron ore
demand, this is expected to soften the rate of growth in global iron ore
demand in the coming years, driving iron ore prices down.
Several structural drivers are expected to contribute to this lower growth inChina’s iron ore demand (see Box 2.1).

43

Figure 4.4: Iron ore price spreads between grades

Figure 4.5: Iron ore price outlook, quarterly

175

200

150
Per cent difference*

125

150

US$/tonne

100
75
50
25

100

50

0
-25
-50
2017

2018

2019

2020

Discount 58% fine ores
Premium 62% Lump ores

2021

2022

2023

Premium 65% pellet

Notes: *Difference to 62% benchmark iron fines CFR; all grades reflect Chinese import prices
Source: Bloomberg (2023)

Strong growth in ex-China iron ore demand over the outlook period is
expected from rising steel demand and production capacity in regions
such as emerging Asia and the Middle East. This includes over 100 million
tonnes of integrated (Blast Furnace-Basic Oxygen Furnace) steelmaking
capacity, expected to come online in the next few years in Asia alone.
On the supply side, the world’s two largest producers — Australia and Brazil— are expected to continue to collectively grow export volumes by 3.4% perannum over the outlook period to 2025. This follows a ramp up of greenfieldprojects for major Australian miners, and significant expansions planned by
Brazilian producers Vale, CSN and others. New supply from emerging
producers in Africa will also contribute to the growth in global trade of ironore (see World trade section).

Resources and Energy Quarterly September 2023

0
2017

2018

2019

2020

2021

2022

2023

2024

2025

Notes: China import iron ore fines 62% Fe spot (FOB)
Source: Bloomberg (2023); Department of Industry, Science and Resources (2023)

From an estimated average price of around US$100 per tonne (FOB) in
2023, the benchmark iron ore price is projected to steadily fall to an
average of about US$76 per tonne by 2025 (Figure 4.5).
Portside sales of iron ore in China are expected to continue as a relatively
small, though important, form of access for global trade of iron ore over theoutlook period. The settlement of trades in Chinese renminbi (as opposed
to US dollars) will likely continue to grow. Last year, BHP delivered its first
shipment of a spot trade of RMB-based iron ore, with other major
producers (such as Rio Tinto and Fortescue) also reporting a substantial
increase in portside sales. This, along with the introduction of a new RMBbacked futures contract for China portside fines by CME Group, isconsistent with the broader objective set out by China in its current 5 year
plan: to promote the international use of the RMB, particularly in the tradeof commodities.

44

4.3

World trade

Global iron ore supply improved in June quarterIn the June quarter 2023, combined shipments for Australia, Brazil, South
Africa and Canada — representing more than 80% of global seaborne
supply — were estimated at around 348 million tonnes. This was a 9.8%
rise quarter-on-quarter, reflecting an improvement in weather conditions inAustralia and Brazil (following a typically wet March quarter) which are set
to continue with projected El Nino effect.
In the first half of 2023, total shipments for the four major exportingcountries were around 666 million tonnes, a rise of 4.4% compared withthe same period in 2022.
Steady growth in global iron ore trade expected the outlook
Global trade is expected to grow by 2.6% annually over the outlook period
to 2025, with new supply coming online in Australia, Brazil and Africa overthat time. Australia is projected to see continued ramp up of greenfieldprojects from established producers such as Rio Tinto, BHP and
Fortescue, as well as emerging producers such as Mineral Resources
Limited and Atlas Iron. Over the outlook period, Australia’s iron ore exports
are projected to rise at an average annual rate of 2.3% to reach
946 million tonnes by 2025 (see Australia section for more detail).
Total iron ore shipments from Brazil increased by 12.1 million tonnes yearon-year in the June quarter 2023. This was driven by a 6.3% rise in output
of Vale, Brazil’s largest producer, with strong production increases in mostof its mines including S11D. This reflected efforts to improve asset
reliability and the installation of new crushers in 2022. Production
increases also reflected improved output from the Itabira, and Vargem
Grande complexes.
Vale’s guidance for 2023 production remains 310–320 million tonnes(compared with 310 for 2022). Late last year, the company also steppedaway from its aim to return to pre-2019 production levels of 400 million
tonnes per annum. Instead, the company has released production
guidance of 340–360 million tonnes per annum by 2026, and continues to
Resources and Energy Quarterly September 2023

emphasise a ‘quality over quantity’ approach to its production. In May
2023, Vale also announced in that it will be working with French DRI
producer GravitHy to develop a carbon-neutral steelmaking process using
Vale’s iron ore briquettes technology. The companies will jointly evaluate
the construction of a plant located at Fos-sur-Mer (France) to produce
direct reduction briquettes from Vale’s iron ore feedstock.
Over the outlook period to 2025, Brazil is still expected to grow iron ore
exports by around 6% annually. This will include Vale’s S11D expansion,as well as new and expanded output by a number of other producers,
including CSN’s Casa de Pedra mine, and IndoSino’s Amapa high gradeconcentrate.
Global iron ore exports (ex-Australia and Brazil) are projected to grow byaround 3% over the outlook period to 2025. Global supply will be bolsteredby additional supply from Canada and new projects coming out of Africa,
including the 150 million tonne per annum plus Simandou mine which istargeting first production in 2025–26.
CMRG exploring ways to work with buyers procuring spot iron cargoes
It has been reported that around 30 Chinese steel mills have signed 2023
iron ore procurement contracts through China’s new state-owned company
China Minerals Resources Group (CMRG). To date CMRG has focussed
on contracts for volumes under long-term contracts. However, recent
reports indicate CMRG is exploring ways to cooperate with market
participants on procuring spot iron ore cargoes.
Over the outlook period, CMRG is expected to play an increasing role incontract negotiations and price setting in the global iron ore market. The
latest reported move into the spot iron ore market would expand thecapacity of CMRG in this role. It is unclear how quickly this reported push
into the spot market will occur, and how it will affect the CMRG’s ability tonegotiate lower prices for Chinese mills.
CMRG started negotiations in 2023 on iron ore supply on behalf of anumber of China’s major steelmakers. The Group was established in July
2022 and was widely seen as an effort by the Chinese government to45

guarantee the supply of important mineral resources — including theestablishment of a single, central purchasing platform for iron ore.
CMRG is expected to manage purchases on behalf of China’s largest
steelmakers, who account for the majority of the country’s annual steel
production. This includes purchase discussions with major producers,
such as Rio Tinto, Vale and BHP.
While information on CMRG activities remains limited, additional clarity is
expected as negotiations for next year’s purchasing contracts begin overcoming months.
Infrastructure cost sharing agreed for Guinea’s Simandou mine
Progress on Guinea’s Simandou 150-200 million tonne mine continued in
the September quarter, with Rio Tinto announcing in August that it hadreached agreement with the Guinean Government and Winning
Consortium Simandou to develop the 600 kilometre rail line required totransport the iron ore to the port.
The latest agreement establishes that the infrastructure capacity andassociated cost will be shared equally between the two controlling groups.
The Simandou mine is divided into 4 blocks, with 2 blocks controlled by
Rio and Aluminum Corp of China, and the remaining 2 blocks owned by
the Winning Consortium Simandou, backed by Chinese and Singaporean
companies.
The latest announcement builds on the establishment of the governanceand operations model for development of the mine infrastructure earlier
this year. The Guinean Government is targeting completion of
infrastructure by 2024, and commercial production in either late 2025 orearly 2026.

As India’s steelmaking capacity continues to grow in the coming year, thisis likely to reduce the quantity of iron ore available for export. In November
2022, the Indian government cut the tax rate (from 50% to 30%) for ironore concentrates and scrapped the 50% export tax on low grade (<58%Fe) iron ore it introduced in early 2022. The higher tax rates were seen at
the time as an effort by the government to manage input prices and retain
iron ore for India’s domestic industry. However, as India has historically
been seen as a price-sensitive iron ore exporter — with domestic miners
incentivised to export in times of high seaborne prices — the lower export
tariffs are not expected to lead to a significant boost in India’s iron ore
exports over the outlook period.

4.4

Australia

Export volumes surge in first half of 2023
Australia’s iron ore export earnings were $32.5 billion in the June quarter
2023, a 5.5% (or $1.9 billion) decrease year-on-year. The decreasereflected weaker iron ore prices, with the unit export price in the Junequarter averaging around $145 per tonne — 7% lower compared with thesame period in 2022.
Australia exported 225 million tonnes of iron ore in the June quarter, up
1.2% year-on-year. The strong June quarter results lifted exports for the
first half of 2023 to 440 million tonnes (Figure 4.6). The strong result
reflected the ongoing ramp up of BHP’s South Flank, Fortescue’s Eliwana
and Rio Tinto’s Gudai-Darri operations.

India’s iron ore and pellet exports fell in the June quarter

Rio Tinto shipped 79.1 million tonnes of iron ore in the June quarter, down
1% year-on-year. This was largely due to planned major maintenance atthe Dampier Port and a train derailment on 17 June. The rail line wasreopened on 21 June. During the quarter, the new Gudai-Darri mineachieved sustained nameplate capacity.

India's iron ore and pellet exports reached 10.4 million tonnes in the Junequarter 2023, down 10% from the 11.6 million tonnes in the March quarter
2023. In June this year, India’s iron ore exports fell by 6% month-on-monthand pellet exports fell by 46%.

Rio Tinto guidance for 2023 remains at 320–335 million tonnes. With
ongoing operational improvements across the Pilbara system, thecompany advises that full-year shipments are expected to be in the upper
half of the range.

Resources and Energy Quarterly September 2023

46

Figure 4.6: Australian monthly iron ore export volumes

Figure 4.7: Australia’s iron ore export volumes and values

85

1,000

160

750

120

500

80

250

40

70
65
60

A$ billion

75

Million tonnes

Million tonnes

80

55
50

Jan Feb Mar Apr May Jun
2016-2021 range

Jul

Aug Sep Oct Nov Dec

2022

2023

Source: ABS (2023) International Trade, Australia, 5368.0; Department of Industry, Scienceand Resources (2023)

In June, Rio Tinto and China Baowu Group signed a memorandum of
understanding (MoU) relating to a series of projects to help decarbonise
the steel value chain. The projects include efforts to optimise pelletisation
technology for Australian ores as a feedstock for direct reduction.
BHP’s iron ore output was 65.3 million tonnes in the June quarter, up 2%
year-on-year. The company provided 2023–24 production guidance of
254–264.5 million tonnes (equating to 299–311 million tonnes on a 100%
basis). This includes the further ramp up of South Flank, which BHP
expects to reach nameplate capacity (of 80 million tonnes per annum) by
the end of the June quarter 2024, as well as its port debottlenecking
project (PDP1).
Fortescue's total iron ore shipments were 48.9 million tonnes in the Junequarter 2023, a 6% increase quarter-on-quarter. Total shipments of
192 million tonnes for the 2022–23 financial year represented a 2% gain
year-on-year. This was at the top of the company’s guidance and was the
fourth consecutive year of record shipments.
Resources and Energy Quarterly September 20230
2012–13

2015–16
2018–192021–22
VolumeValues (rhs)02024–25

Source: ABS (2023) International Trade, Australia, 5368.0; Department of Industry, Scienceand Resources (2023)

Fortescue has set its 2023–24 fiscal year production guidance at 192–197
million tonnes. First production of the 22 million tonnes per annum Iron
Bridge Magnetite project was achieved during the June quarter. Allconcentrate produced to date has been at or above 67% Fe magnetite,with first concentrate loaded for shipping in July.
Mineral Resources’ iron ore shipments were 4.3 million tonnes in the Junequarter 2023 and 17.5 million tonnes for 2022–23. This was in line withguidance of 17.2–18.8 million tonnes. All major approvals have been
received for the Onslow Iron project. The first ore-on-ship delivery is
expected in June 2024. The company is targeting exports of 30 million
tonnes per annum, with infrastructure capable of 35 million tonnes perannum.
Export values to ease over outlook on moderating prices
Australia’s iron ore export earnings are estimated to have reached$124 billion in 2022–23, down from $132 billion in 2021–22. Higher
production volumes were offset by lower prices. Moderating prices over47

the outlook period are forecast to lead to lower iron ore earnings, with
exports of $120 billion in 2023–24, and $99 billion in 2024–25 (Figure 4.8).

Figure 4.8: Australian iron ore exploration expenditure
400

Exploration rose in June quarter 2023

Revisions
Export earnings in 2023–24 have also been revised up from the June 2023
Resources and Energy Quarterly; we now expect earnings of almost$120 billion rather than $110 billion, reflecting a lower-than-expectedexchange rate, slightly higher prices and a small increase in volumes.
Earnings in 2024–25 are around $6 billion higher than forecast in the June
2023 Resources and Energy Quarterly.

Resources and Energy Quarterly September 2023

350
300
$ millions

A total of $186 million was spent on iron ore exploration in the Junequarter 2023 (Figure 4.9). This was 31% higher compared with theprevious quarter, and 8% lower than the same period in 2022. Exploration
has fallen from near decade highs last year. However, the latest results
continue the broad upward trend in iron ore exploration which was
triggered by the historical high iron ore prices of above US$200 a tonne
reached in the first half of 2021.

250
200
150
100
50
0
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

Source: ABS (2023) Catalogue 8412.0

48

Table 4.1: World trade in iron ore
Million tonnes

Annual percentage change

2022

2023 f

2024 f

2025 f

2023 f

2024 f

2025 f

1,574

1,646

1,672

1,699

4.6

1.6

1.6

China

1,108

1,162

1,129

1,101

4.9

-2.9

-2.5

Japan

107

109

111

110

2.4

1.7

-0.7

European Union

114

100

113

115

-12.4

13.5

1.4

South Korea

69

71

73

74

3.3

3.1

1.3

Rest of Asia

63

61

74

94

-3.2

20.1

27.9

India

7

27

36

51

289.6

30.2

42.8

Australia

884

906

917

946

2.5

1.2

3.1

Brazil

344

365

388

411

6.1

6.3

5.9

South Africa

58

59

60

61

1.7

1.7

1.7

Canada

55

57

59

61

3.6

3.5

3.4

India

16

28

30

32

74.1

7.1

6.6

World trade
Iron ore importsaIron ore exports

Notes: a Excludes China, Japan, South Korea, Taiwan and India; s Estimate; f Forecast; r Annual percentage change
Source: World Steel Association (2023); International Trade Centre (2023); Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

49

Table 4.2: Iron ore outlook
Million tonnes
World

Annual percentage change

Unit

2022

2023

2024

– nominal

US$/t

103

100

84

76

-2.3

-15.8

-10.6

– real

US$/t

107

100

82

72

-6.6

-18.1

-12.4

Unit

2021–222022–23

2023–24f

2024–25f

2022–23

2023–24f

2024–25 f

Mt

5.8

5.6

5.8

5.8

-2.6

2.7

0.0

Mt

929

955

985

1,014

2.9

3.1

2.9

Mt

0.81

1.21

1.00

1.10

49.6

-17.5

10.6

– nominal value

A$m

1,047

1,326

1,167

1,166

26.7

-12.0

0.0

– real value

A$m

1,166

1,380

1,167

1,130

18.3

-15.4

-3.2

Mt

874

895

920

933

2.4

2.7

1.4

– nominal value

A$m132,489

124,167

119,981

99,123

-6.3

-3.4

-17.4

– real value

A$m

147,585

129,234

119,981

95,993

-12.4

-7.2

-20.0

f

f

2025

f

r

2023

2024 f

2025 fPrices abAustralia
Production– Steel c– Iron oregExports
Steel cIron oreihiNotes: a Spot price, 62% iron content, fob Australian basis; b In 2023 US dollars; c Crude steel equivalent; Crude steel is defined as the first solid state of production after melting. In ABS Australian
Harmonized Export Commodity Classification, crude steel equivalent includes most items from 7206 to 7307, excluding ferrous waste and scrap and ferroalloys; f forecast; g In wet metric tonnes;
h In dry metric tonnes; i In 2023–24 Australian dollars; r Annual percentage change; s Estimate
Source: ABS (2023) International Trade in Goods and Services, Australia, 5368.0; Bloomberg (2023); World Steel Association (2023); company reports; Department of Industry, Science andResources (2023)

Resources and Energy Quarterly September 2023

50

51

52

Summary•

Metallurgical coal prices remain well above their pre-2019 level, andhave held up in recent months despite a softening global economic
outlook. The Australian premium hard coking coal price is expected toaverage US$265 a tonne in 2023, easing to around US$200 a tonne by2025, as supply conditions improve.

Australia’s exports are forecast to lift from an estimated 157 Mt in
2022–23 to 172 Mt in 2024–25, as several new mines open (seeAustralia section).



As prices decline, the value of Australia’s metallurgical coal exports is
forecast to fall from $62 billion in 2022–23 to $41 billion in 2024–25.

5.2

World trade

Demand for metallurgical coal held up through the September quarter.
Markets appear to have stabilised, with demand matched by more reliablesupply as weather disruptions eased following the end of the La Niña
weather episode affecting Australia.
Looking forward, world metallurgical coal trade is forecast to increase from
312 Mt in 2022 to 316 Mt by 2025, led by rising demand in India (Figure5.1). The current supply gap in metallurgical coal markets is expected toclose during the outlook period, as supply firms and demand growth cools
slightly amidst a temporary downturn in global economic conditions.
However, there are significant risks in both directions.
Steelmaking in Europe and Asia remains relatively soft, but with significant
potential to ramp up. In total, European countries have re-opened aroundhalf of the 25 Mt of blast furnace capacity they previously closed whenmetallurgical coal and electricity prices surged in the wake of the Russian
invasion of Ukraine. A further decline in input prices (or growth in prices forsteel) could trigger further reactivation of offline capacity. New facilities
continue to open in India and other parts of South Asia, where expanding
steel production remains a widespread policy goal. Further ramp-ups incapacity across Europe and Asia provide an upside possibility to demandin 2024 and 2025.

Resources and Energy Quarterly September 2023

Prices are expected to remain elevated during the outlook period.
Underinvestment has not affected metallurgical coal supply to the same
extent as thermal coal, but metallurgical coal demand also remains subject
to higher expected growth rates. Over time, rising steel requirements in
Asia may drive investment in more risky deposits, adding to potential
volatility and market uncertainty.
The recent fall in thermal coal prices should also help to reduce pressure
on metallurgical coal prices. As thermal coal prices have declined, theincentive to sell unwashed metallurgical coal into thermal markets has
dwindled, improving the stability of supply to steelmakers.
Chinese official policy remains a significant variable for metallurgical coalmarkets. Chinese steel production has often been subject to government
intervention, and any new production cap could drive a significant cut in
metallurgical coal prices, potentially encouraging steel production in
Europe and elsewhere to reopen.
Figure 5.1: Metallurgical coal imports
80
70
60
Million tonnes

5.1

50
40
30
20
10
0

China
2019

Japan
2020

South
Korea
2021

2022

Taiwan

India

2023f

2024f

EU27
2025f

Notes: f forecast s estimate
Source: McCloskey (2023); Department of Industry, Science and Resources (2023)

53

World imports

Chinese metallurgical coal imports likely to ease
China’s steel production has grown significantly relative to its steel
demand in recent quarters. Steel output was up by 11.5% over the year toJuly, despite some recent restrictions in provinces affected by air pollution.
At the same time, Chinese steel demand has been losing pace as a resultof slowing residential building activity, completion of infrastructure projects
and slower growth in the economy.
As a result, Chinese steel production has become more aligned towards
the export market in recent months (see Steel chapter). This makes China
more vulnerable to potential shifts in world steel demand and a softening
global economic outlook. This may be corrected by a change to China’s
steel production targets, which would bring production for 2023 closer tothe levels of 2022.
Chinese metallurgical coal output edged back in July as heavy rainsdisrupted some mines. A series of safety inspections also briefly slowed
work at some sites. However, coal output has been stable through theyear, and is expected to grow in the latter half of the September quarter.
China imported just over 7 Mt of metallurgical coal in July, above the levelof a year ago but down by almost 8% from June. Higher domestic coal
output and slowing domestic demand should continue to reduce China’s
supply gap and pull back imports over the rest of 2023.
Imports from Australia are yet to rise substantially, with Chinese users
capitalising on relatively low domestic prices and new rail links from
Mongolia. China (and India) have also lifted imports of Russian coal,following bans on Russian exports by some Western nations (Figure 5.2).
However, the Chinese Government has recently encouraged use of higher
quality metallurgical coal, which could potentially lift demand for Australian
output in the future.
Chinese policy will remain highly influential in the immediate term, but
longer-term structural changes are also likely to moderate China’s import

Resources and Energy Quarterly September 2023

requirements. Other long-term influences include higher investment indomestic output and internal transportation.
Chinese metallurgical coal imports are expected to remain below the 2022
level through the full outlook period, affected by softer conditions in
Chinese steelmaking and across the wider Chinese economy. However,
economic recovery is expected to eventually gather pace, allowing formodest growth in imports towards the end of the outlook period.
Figure 5.2: Chinese metallurgical coal imports, monthly
1210Million tonnes

5.3

8
6
4
2
0
2017
2018
2019
2020
2021
2022
Australia Canada Mongolia Russia United States

2023
Others

Source: McCloskey (2023)

India’s metallurgical coal imports are growing on structural factors
Indian metallurgical coal imports rose steadily through H1 2023, and werearound 15% higher over the year to June. This comes despite a generalsoftening in the global steel outlook and reflects years of investment
intended to build up steel production within India.
India’s metallurgical coal needs are expected to soften slightly in thesecond half of 2023, with seasonal factors such as monsoon season
appearing to be relatively mild thus far. The substantial new NMDC
integrated steel plant is expected to increase India’s metallurgical coalrequirements from 2023.
54

Japanese metallurgical coal imports have steadiedA recovery in Japanese steelmaking pushed up imports of metallurgicalcoal during the early part of 2023, but imports have since stabilised.
Shipments were unchanged (at just under 4 million tonnes) in June, withgrowth from Canada and USA offsetting a fall in imports from Australia.
Japanese imports are expected to decline over the longer term as somesteelmaking capacity retires. Japan’s JFE Steel Corporation closed asignificant plant in the September quarter, reducing the nation’s ongoingmetallurgical coal needs.

5.4

World exports

Global exports of metallurgical coal have firmed up in the aftermath of the
La Niña climate episode. Structural shortfalls in metallurgical coal markets
have mostly eased, but a small shortfall is likely to persist for at least
another year, as some Russian supply remains stranded from world
markets.
On the demand side, a fall in the outlook for global steelmaking is likely toease price pressure. Any further downturn in global steelmaking (or policychanges in China) could result in a surplus of metallurgical coal supply,
potentially lowering prices.
US producers have benefited from the removal of Russian supply
US suppliers are benefiting from improved transport and the removal ofcompeting Russian supply due to sanctions by many Western nations.

Resources and Energy Quarterly September 2023

Coal exports from the US have been relatively strong since mid-2022, andhave been supported recently by the resolution of several infrastructure
faults. US metallurgical coal resources include significant quantities at thehigher grades traditionally supplied by Russia, and exports to the EU are
expected to remain healthy in the near-term.
US metallurgical coal exports are generally high-cost, but remain profitable
for the time being. Over the outlook period, US exports are expected toedge back as prices fall and marginal or cost-sensitive exporters withdraw
from the seaborne market.
Figure 5.3: Metallurgical coal exports
200
160
Million tonnes

India’s steelmakers have announced detailed proposals for investments
worth over US$11 billion. Some of these projects are expected to comeonline over the outlook period, adding to metallurgical coal imports (Figure5.1). India’s steel production remains closely correlated with urbanisationand industrial development, but also has links to global economic growth,which could see steel production drop off in the event of any global
economic downturn. It is expected that Indian metallurgical coal imports
will lift steadily from 58 Mt in 2022 to 73 Mt by 2025, though risks are tilted
to the downside.

120
80
40
0

Australia
2019

US
2020

Canada2021

2022

Mongolia

Russia

2023f

2024f

Mozamb.
2025f

Notes: f forecast s estimate
Source: IEA (2023); Department of Industry, Science and Resources (2023)

Mongolian exports have increased following expansion of rail capacity
Mongolian coal exports have benefited from a Chinese-directed
infrastructure program and the completion of three substantial railway
lines. These lines have made Mongolian coal exports (to China) much
more scalable and efficient, reducing costs and expanding capacity.
The easing of COVID-19 disruptions has also helped Mongolian exporters,
who are expected to rapidly increase their export volumes between 2023
and 2025 (Figure 5.3).
55

Canadian exports are nearing their peak
Canadian output is expected to remain largely steady through the outlook
period, with falling output at ageing mines offset by ramp-ups at Canada
Coal’s re-opened Grand Cache mine. The mine previously produced
around 2 Mt annually, and is expected to match this level again by 2024.
Montem Resources has decided not to proceed with its proposed Tent
Mountain metallurgical coal mine. The Albertan State Government
previously proposed removing a ban on open cut coal mines across theRockies, but withdrew its proposal as a result of protests and low public
support. Tent Mountain was one of only four open cut mines capable ofproceeding in the wake of that government decision. The mine would haveproduced around 1.1 Mt of metallurgical coal annually.
Exports from Mozambique are growing, supported by improved transport
In the early stages of the COVID pandemic, Mozambique’s exports fell
temporarily, as low prices forced much of the nation’s high-cost production
out of the market. Exports are forecast to recover to 7 Mt by 2024,
supported by Vulcan Resources’ Moatize mine — where work has finished
on a preparation plant upgrade — and by upgrades to the Nacala logistics
corridor rail line and port.
Higher output at the Moatize site may be temporarily affected by seasonal
heavy rainfall, but growth to over 7 Mt of metallurgical coal (annually) is
expected over the longer term.
Military escalations in the Black Sea region are affecting Russian exports
Russia’s invasion of Ukraine has resulted in a dramatic decline in thermal
coal exports — and a more modest easing in metallurgical coal output —from the region. The war has recently escalated around the Black Sea
area, where significant quantities of seaborne coal have traditionally been
loaded and shipped. The Ukrainian Government has designated several
significant Russian Black Sea ports (including Novorossiisk, Taman andTuapse) as ‘war risk areas’, causing insurance costs to surge and many
vessels to cease service to the ports. This follows a similar Russian
declaration targeting Ukrainian-controlled ports, which disrupted grain andResources and Energy Quarterly September 2023

coal shipments from the area. Russian shelling of ports in the area has
stepped up in recent months and is likely to see metallurgical and thermal
coal exports reach a new low in the September quarter.
The impact of sanctions and military escalations in coal export regions has
been exacerbated by operational issues. These include a fire at Russia’s
Novorossiisk terminal which affected transport of cargo to bulk vessels.
Russia’s efforts to circumvent sanctions and redirect coal to other markets
have become increasingly hampered, and eastbound rail (to China)
remains backlogged. Thermal coal exports have borne the brunt of theresulting export decline, but metallurgical coal exports are expected to
face some weakness through and beyond the outlook period.

5.5

Prices

Metallurgical coal prices set to decline further
After falling through the March quarter, metallurgical coal prices stabilisedin late April, with premium hard coking coal prices holding at around
US$230 a tonne (Figure 5.4). Price pressures have edged up in recent
weeks amidst escalating military tensions around the Black Sea region.
Most structural factors point to a softening outlook for growth inmetallurgical coal demand. Global steelmaking is expected to lose somemomentum, while supply from Australia is likely to grow following the endof the La Niña cycle. Chinese steelmaking remains subject to downside
risks, and domestic prices for metallurgical coal in China have fallen
recently. The removal of China’s informal import restrictions on Australiancoal will allow trade to reorient in more efficient patterns, thoughmetallurgical coal shipments between the two countries remain nascent at
the time of writing.
Prices may edge up following the passing of the latest monsoon season,
which could result in a brief surge in imports to India. Structural expansionof steelmaking in the country may also add a long-term price push. The
South Asian region has generally moved on from COVID-19 containment
measures, making global steelmaking less vulnerable to Chinese policy
than in the past.
56

On balance, steadier supply and weaker demand should result in amodest but noticeable decline in prices, though weather events andconflict around the Black Sea region add to upside risks. Prices forAustralian metallurgical coal are forecast to decrease from US$264 atonne in 2023 to around US$200 a tonne by 2025 (Figure 5.4). Risks
around the price outlook are broadly balanced.

Metallurgical and thermal coal producers face growing constraints onavailability of finance. Banks have increasingly sought to pivot away fromall forms of coal in favour of renewables and related commodities. Hopes
among some producers that metallurgical coal would be unaffected havenot been entirely borne out. This is likely to place some further constraint
on metallurgical coal investment over coming years.

Figure 5.4: Metallurgical coal prices — Australian vs US, FOB

Growth in production is nonetheless expected over the outlook period.
Mine openings are set to exceed closures, with metallurgical coal exports
on a stronger trajectory than thermal coal. This will position Australia tomeet the demand of emerging steel markets in the region, including India.

700

US$ a tonne

600

New mines opening in the near future include the Maxwell and Vickery
mines in NSW, and the Burton, North Goonyella, Hillalong, Wilton Fairhill
and Olive Downs projects in Queensland. Sojitz Blue has also received
approval for its Gregory Crinum open cut coal extension, which could now
potentially run for another 50 years.

500
400
300
200

Figure 5.5: Australia’s metallurgical coal export volumes, monthly

100

20

0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Australian prime hard coking
US Low Vol

16

5.6

Australia

Metallurgical coal export volumes are growing, offsetting lower prices
Australian metallurgical coal output steadied and then began to rise as
persistent disruptions from weather and COVID finally eased (Figure 5.5).
The new El Niño season is likely to bring about sustained dry conditions
over the remainder of 2023, though summer storms remain a risk factor forports and shipping.
An emerging issue around labour shortages could constrain metallurgicalcoal production through the outlook period. Labour shortages are affecting
mine sites but are also creating problems with rail shipment in parts ofQueensland. The impact of this is likely to grow over time if not mitigated.
Resources and Energy Quarterly September 2023

Million tonnes

Notes: ‘Low Vol’ is low volatility coking coal.
Source: McCloskey (2023); Department of Industry, Science and Resources (2023)

12
8
4
0
Jan-19Japan

Jan-20China

South Korea

Jan-21
TaiwanJan-22
India

Vietnam

Jan-23
Rest of world

Source: ABS (2023) International Trade, Australia (trade tables subscription)

57

Higher production in New South Wales and (especially) Queensland is
expected to lift Australia’s exports from a weather-affected 157 Mt in
2022–23 to 172 Mt by 2024–25. Metallurgical coal export earnings are
expected to ease from $62 billion in 2022–23 to $41 billion by 2024–25(Figure 5.6), with higher volumes partly offsetting falling prices.

84

180

72

150

60

120

48

90

36

60

24

30

12

0

Revisions to the outlook for Australian metallurgical coal exports
The earnings forecast for 2023–24 has been revised down by around$1 billion from the June 2023 REQ, as a downturn in global steelmaking
eases price conditions. The forecast for 2024–25 is largely unchanged.

2020–21
Volumes2022–23
Values (rhs)02024–25

Source: ABS (2023) International Trade, Australia 5454.0; Department of Industry, Scienceand Resources (2023)

Figure 5.7: Australian coal exploration expenditure and prices

US$/t

Coal exploration expenditure has increased
Australia’s coal exploration expenditure rose to $80 million in the Junequarter, growing 30% through the year (Figure 5.7). Record prices haveencouraged exploration, but capital issues may be constraining growth toa degree. Spending remains well below 2011 levels, when a more modest
price peak pushed exploration above $200 million for several quarters.

2018–19

A$ billion

Global demand for Australian metallurgical coal remains ample, supportedby the high quality of Australian product and by the removal of some(competing) Russian coal from global markets. China’s trade impediments
targeting Australian coal have ended, but exports to China remain
marginal — around 200,000 tonnes of metallurgical coal were exported inJuly 2023, compared to a monthly average of 3.6 million tonnes during
2019.

210

500

100

400

80

300

60

200

40

100

20

$m

Exports will be affected in the September quarter by industrial action atSouth32’s Appin mine. Workers at the site (including site safety managers)
voted to take the action following a breakdown in salary negotiations.

Figure 5.6: Australia’s metallurgical coal exports

Million tonnes

In February 2023, BHP announced plans to divest its Daunia andBlackwater metallurgical coal mines in Queensland, but has yet toannounce a buyer.

0
2015

2017

HCC spot price (lhs)

2019

2021

2023

0

Coal exploration spending (rhs)

Source: ABS (2023); McCloskey (2023)

Resources and Energy Quarterly September 2023

58

Table 5.1: World trade in metallurgical coal
Annual percentage change

Unit

2022

2023s

2024f

2025f

2023s

2024f

2025f

Mt

312

299

310

316

-4.3

3.7

2.1

China

Mt

64

50

54

55

-21.3

6.9

2.2

India

Mt

58

70

73

73

20.1

4.7

0.0

Japan

Mt

43

41

41

41

-4.0

0.2

0.5

European Union 28

Mt

36

36

36

36

-0.2

0.0

0.0

South Korea

Mt

34

34

34

34

1.2

0.1

-1.8

Australia

Mt

161

163

172

174

1.4

5.4

1.5

United States

Mt

42

43

42

43

1.5

-1.2

2.3

Canada

Mt

28

28

26

26

-0.7

-6.0

-0.2

Russia

Mt

42

41

41

41

-2.8

0.0

0.0

Mongolia

Mt

14

16

18

19

14.0

13.8

6.1

Mozambique

Mt

4

4

4

4

6.7

0.0

0.0

World trade
Metallurgical coal imports

Metallurgical coal exports

Notes: f Forecast; s Estimate.
Source: IEA (2023) Coal Information; IHS (2023); Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

59

Table 5.2: Metallurgical coal outlook
Annual percentage change
World

Unit

2022

2023s

2024f

2025f

2023s

2024f

2025f

– nominal

US$/t

372

267

225

207

-28.0

-15.9

-8.1

– reald

US$/t

388

267

219

197

-31.1

-18.2

-10.0

– nominal

US$/t

364

264

223

205

-27.6

-15.4

-7.9

– reald

US$/t

380

264

217

196

-30.6

-17.7

-9.8

Australia

Unit

2021–222022–23

2023–24f

2024–25f

2022–23

2023–24f

2024–25f

Production

Mt

168

168

178

178

0.1

5.6

0.2

Export volume

Mt

163

157

172

172

-3.7

9.9

0.2

– nominal value

A$m67,58862,07847,16841,014

-8.2

-24.0

-13.0

– real valuei

A$m75,28964,612

47,16839,719

-14.2

-27.0

-15.8

Contract pricese

Spot pricesg

Notes: d In 2023 US dollars. e Contract price assessment for high-quality hard coking coal. i In 2023–24 Australian dollars. s Estimate f Forecast. g Hard coking coal fob Australia East Coast ports.
s Estimate.
Source: ABS (2023) International Trade in Goods and Services, Australia, 5368.0; Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

60

61

62

6.1






6.2

Summary
After an extraordinary spike in 2022, thermal coal prices fell back sharply
in H1 2023, but have since stabilised, with prices for higher grade coal
lifting slightly in recent weeks. As global supply recovers, the Newcastle
benchmark price (6,000 kcal) is forecast to decline from almost US$180
a tonne over 2023, to around US$115 a tonne by 2025.
A gradual recovery from recent supply outages is expected to see
Australian thermal coal exports rise from 182 Mt in 2022–23 to 203 Mt
by 2024–25 (see Australia section).
As prices decline, export values are forecast to fall from a peak above$65 billion in 2022–23 to around $28 billion by 2024–25.

World tradeThis year’s Northern Hemisphere summer brought unusually intense heat
across several highly populated countries and regions, resulting in higher
thermal coal demand for generating power to cool dwellings/offices. In
China, high temperatures through July and early August kept Chinese
imports near the strong levels of early 2023, maintaining pressure on the
seaborne coal market. Elsewhere in Asia, coal demand remains mixed,with India showing some decline from a peak in May.
Europe also experienced sustained higher-than-average temperatures
over recent months, but large European gas reserves (and relatively low
gas prices) kept coal demand reasonably contained. European nations
built high coal stockpiles following Russia’s invasion of Ukraine, and thesestocks will likely reduce pressure on coal imports even if gas reserves fall.
European countries have made significant investments in new gas sources
and renewable energy since the Russian invasion of Ukraine. New LNG
terminals have been constructed at an extremely rapid pace, nuclear
power targets and operational timetables have expanded, and government
support has increased for renewable energy. A complete and sustained
reorientation away from Russian gas may take a bit longer, and European
coal use (especially in the industrial sector) may grow in the short-term if
new energy sources prove to be volatile or short of requirements.

Resources and Energy Quarterly September 2023

However, the likelihood is that the long-running European energy linkages
to Russia will soon be obsolete.
Coal use across Europe remains locked into broad long-term decline.
European countries committed to full phase-outs by 2030 include Finland,
Denmark, France, the Netherlands, Italy, and Spain. The UK is expected
to close its final coal plant by 2024, with coal capacity brought online
briefly during the 2022–23 winter now set to be closed permanently.
With trends in China and Europe offsetting each other, overall thermal coaldemand held up through the September quarter. However, coal supply has
also firmed up in recent months. Congestion at Australian ports has largely
cleared, and the end of the La Niña cycle has driven stronger exports from
Australia and Indonesia. South African and Russian exports have edged
back a bit amidst temporary transport delays and logistics problems.
With demand and supply relatively balanced, prices stabilized in June andJuly at around US$130 a tonne for Newcastle 6,000kcal thermal coal.
Despite the sharp declines of late 2022 and early 2023, prices are still
relatively high in historical terms. Some further modest easing in prices is
expected over the coming quarters as Chinese demand softens with thechange of seasons.
It is expected that existing mine capacity will be broadly sufficient to meetdemand through the rest of the 2020s. After this, supply is expected tostart declining structurally due to the relative lack of new thermal coalprojects. The pace of decline on the demand side is less clear, with rises
in demand within developing Asia offsetting falling use across most OECDnations. If global usage falls more slowly than global supply, prices willrise. This price rise could reduce the competitiveness of coal and help tobring usage more in line with supply. However, markets would also likely
become more unpredictable and volatile while adjustments to supply anddemand occur.
Uncertainties regarding long-term transition in coal markets will affectinvestment in coal supply during the immediate outlook period, adding an
upward skew to prices. This skew may be exacerbated as ageing mines

63

6.3

World imports

Global imports of thermal coal are on track to edge down by around
2.5% in 2023 as demand for seaborne coal from China declines. Increases
in demand for India and Other Asia offer a partial offset.

Figure 6.1: Thermal coal imports
250
200
Million tonnes

become subject to higher maintenance costs for ageing equipment andcapital. Underinvestment should not noticeably affect output during theoutlook period, but this underinvestment could become ‘baked in’, adding
to the risk of supply shortfalls and price spikes further out. Existing coalproducers will benefit from these trends, but the overall stability of coalmarkets may depend on the ability of countries to reduce dependency onthermal coal by investing in other energy sources.

0

Chinese policy remains a significant variable. The need to reconcile
China’s ongoing coal plant constructions with its commitment to net zero
emissions by 2060 could result in unpredictable policy pressures. This
may add volatility to the outlook for thermal coal demand.

Resources and Energy Quarterly September 2023

China

Japan

South
Korea

2019

2020

2021

Taiwan
2022

India

2023f

Other
Asia
2024f

EU27

2025f

Note: e Estimate f Forecast
Source: McCloskey (2023); IEA (2023) Coal Market Report; Department of Industry, Scienceand Resources (2023)

Figure 6.2: China’s thermal coal imports, monthly
35
30Million tonnes

China’s coal pipeline has proven resilient at a time when other Asian
countries have curbed their coal expansions considerably. China retains
more than 100GW of coal-fired power capacity under construction.
However, much of this is replacement capacity for older and less efficientplants, and improved domestic supply is expected to keep pace with any
additional coal needs. Coal imports thus remain on a declining path overthe longer term, eventually becoming limited to niche industrial uses suchas coal-to-liquid fuel production in coastal manufacturing hubs.

100
50

Chinese seaborne imports are declining as domestic production grows
Chinese thermal coal use remains strong despite slower than expectedeconomic growth (Figures 6.1 and 6.2), but policy factors may weigh oncoal use in the near-term. The Chinese Government remains committed toreducing coal imports and becoming more energy independent. China hasinvested heavily in nuclear power, renewables, and domestic coalproduction. Investment has also risen in energy transportation, including
freight rail transport and coal-by-wire technology. These measures are
expected to constrain thermal coal imports during the outlook period.

150

25
20
15
10
5
0
2017

2018
Australia

2019
Indonesia

2020

2021

Mongolia

2022

Russia2023
Others

Source: McCloskey (2023)

64

India’s coal imports are rebounding as industrial and consumer use rises
The pace of recent thermal coal use has accelerated in India following theconclusion of COVID containment measures. India remains the mostsignificant growth market for thermal coal, with a substantial rise in imports
expected through the outlook period. This growth will be supported byrising industrial use and higher electricity requirements in the consumer
sector as more users are connected to electricity grids. Higher use also
reflects government mandates for blending at least 6% imported coal inthermal plants. The mandate was introduced following shortages in 2022
and has recently been extended from September 2023 to March 2024.
The Indian Government has sought to meet its coal requirements throughincreased domestic supply as it seeks to become more self-sufficient. A
total of 87 coal blocks were auctioned in recent years to encourage moredomestic mining. Auctions on a further 106 blocks commenced in March
2023, but the take-up rate is unclear at the time of writing.
The Indian Government is also undertaking infrastructure upgrades tosupport domestic production. These include upgrades of the country’s
freight rail network, with much of this new capacity completed by
September 2023.
Resources and Energy Quarterly September 2023

20
18
16
Million tonnes

On balance, it is expected that weather conditions will continue to exert
upward pressure on imports, though a recent softening in domestic prices
suggests market conditions may be easing. Structural factors should result
in declining imports from late 2023 out to 2025 and beyond. The
combination of uncertain domestic demand and strengthening domestic
supply is expected to reduce Chinese seaborne imports from 231 Mt in
2022 to 200 Mt by 2025 (Figure 6.1).

Figure 6.3: India’s thermal coal imports, monthly

14
12
10
8
6
4
2
0
2017

2018

Indonesia

South Africa

2019

2020
United States

2021

2022

2023

Australia

RussiaOther

Source: McCloskey (2023)

Figure 6.4: Japan, South Korea and Taiwan's thermal coal imports
14
12
10
Milloin tonnes

Hong Kong continues to transition its energy use ahead of mainland
China. Hong Kong’s Castle Peak and Lamma coal-fired plants are being
converted to gas-fired generation plants, with further conversions possible
over coming years. Imports to Hong Kong have declined sharply since theoutbreak of the COVID-19 pandemic and are expected to fall to negligible
levels by 2030. Expertise and technology developed in this process could
be exported to broader China to aid in meeting its 2060 net zero targets.

8
6
4
2
0
Mar-20Mar-21
Japan

Mar-22South Korea

Mar-23
TaiwanSource: McCloskey (2023)

65

Further expansions are due to commence from 2024 and 2025. Around90,000 new railcars are expected to be added to India’s rail network by
2025, though this capacity will be multipurpose.

Taiwan’s imports are falling as policy measures ramp up
Taiwan has well-developed plans for its transition away from thermal coal.
The Taiwanese Government has pressed for proposed coal-fired power
plants and upgrades to be cancelled, and has released an energy plan
which would reduce coal from around 42% of generation to 30% by 2025.

Indian import needs have risen recently (Figure 6.3) and are expected tokeep expanding through the outlook period, despite government efforts togrow its domestic supply. On balance, Indian imports are expected to risefrom 153 Mt in 2022 to 209 Mt by 2025 (Figure 6.1). The pace of growth isexpected to slow after 2025, with imports stabilising in the early 2030s andstarting to fall a few years later.

Coal imports to Taiwan are expected to decline steadily through theoutlook period, reaching zero by the 2030s.Taiwanese coal plants aremostly more than 30 years old, and new coal plants are not expected toprogress at a scale to match closures.

Japan’s coal imports are expected to remain strong in the short-term

South Korean coal imports have steadiedJapan is expected to remain a significant thermal coal importer over theoutlook period. The Japanese Government remains committed to its 2050
net zero targets but has recently pivoted its policy towards technologies toreduce coal-generated carbon emissions. These measures include
ammonium co-firing and greater use of hydrogen storage, as well as
broader research into carbon capture & storage technologies.
Previously announced plans to close 100 coal plants by 2030 remain in
effect, but precise timetables and methods for energy substitution are notyet fully developed. Substitution of nuclear energy for coal is ongoing.
Nuclear plants are being reconnected to the grid more rapidly, and theJapanese Government has announced new plans to extend the operating
life of its nuclear fleet beyond 60 years.
Japan’s energy sanctions on Russia could add to the difficulty of broader
energy transition. Imports from Russia to Japan have dwindled sharply inrecent months, with the deficit partly made up through imports from
Australia, which grew by 17% in June.
Japanese coal imports remain solid (Figure 6.4) but are expected to
decline slightly through the outlook period, with nuclear reconnections andrenewable energy deployments making modest inroads into coal use. The
pace of decline may pick up further towards the end of the 2020s as policy
measures aimed at reducing coal use take full effect.

Resources and Energy Quarterly September 2023

South Korea’s latest energy plans include proposals to cut coal-fired
power generation by around half (to 22%) by 2030, eliminating it entirelyby 2050. In contrast, nuclear generation, previously targeted for phasedown, is now set to be phased up from 27% to 30% of total generation.
The South Korean Government is also seeking to substitute for imported
coal with gas and renewables.
Recent spikes in gas prices have slightly complicated the transition fromcoal, but all previously announced policy measures remain in effect. South
Korea retains plans to adjust some coal plants to use ammonia co-firing,which will reduce coal use while retaining generation capacity.
South Korean thermal coal imports remain solid (Figure 6.4), but policypressure is expected to constrain imports over the outlook period. Imports
are expected to hold at around 90 million tonnes annually through to 2025.
South and South East Asian imports are set to peak around 2030
Asian countries represent the last significant growth spots for thermal coal.
The pipeline of proposed coal plant capacity across South Asia fell by 63%
between 2015 and 2021, but a sizeable number of plants remain underconstruction. Nations in the region are estimated to have collectively
imported about 155 Mt of thermal coal in 2022, and this is expected to rise
above 175 Mt by 2024 (Figure 6.5). Some South Asian countries may not
see their demand peak until 2040.

66

A decline in imports to Malaysia is likely over the medium term. Prospects
are growing that some coal capacity could close ahead of its previously
expected end-of-life period. Tenaga Nasional Berhad, Malaysia’s primaryelectric utility, has announced plans to reduce its coal capacity by 50% by2035, which would require plant closures ahead of schedule. It should also
begin to exert pressure on coal imports from the early 2030s.

Figure 6.5: South and South-East Asia thermal coal imports
200

150
Million tonnes

No further coal power is expected to be built in Malaysia, but the scale andnewness of its existing plants should see coal use and imports hold steadythrough the outlook period. Malaysia has large, modern coal plants, whose
competitiveness improved during the 2022 spike in global gas prices.

50

The Philippines is expected to deploy significant new coal power, with coaluse forecast to double by its estimated peak around 2030. Coal plant
constructions were disrupted by the COVID-19 pandemic, but these
disruptions are expected to pass.

Import growth is expected to slow after 2025, with official plans to reducecoal-fired power generation (from 20% of total generation in 2018 to 10%
by 2030) still in effect. This final 10% is expected to primarily serve
industrial users who require highly reliable supply.
Vietnamese coal imports are expected to grow rapidly through the outlook
period. Vietnam was a net exporter of coal until 2015 but has pivoted to
become a significant net importer in recent years. Coal plants constructedin the country have generally been designed to use Indonesian output, andIndonesian coal is expected to support most of the growth in overall
Vietnamese coal imports over the next few years.

Resources and Energy Quarterly September 2023

0

2013
2015
VietnamBangladesh

2017
2019
2021
Philippines
Malaysia
Pakistan
Other

2023
2025
ThailandSource: IEA (2023) Coal Information; Department of Industry, Science and Resources(2023); McCloskey (2023)

Figure 6.6: Thermal coal exports
500
400
Million tonnes

Imports to Thailand are expected to grow through the outlook period,
supported by the country’s industrial output goals. However, prospects forremaining coal plant constructions remain uncertain. Government
proposals initially called for cancellation of all proposed plants and a full
substitution with gas, but it now appears that two coal plants could be built
as a replacement for older lignite burning plants in the country’s north. At
least two other coal projects remain in the pipeline for future development
but are not expected to ultimately proceed.

100

300
200
100
0

Indonesia Australia
2019

2020

2021

RussiaColombia

2022

2023f

South
US
Africa2024f
2025f

Notes: e Estimate f Forecast.
Source: McCloskey (2023); IEA (2023) Coal Information; ABS (2023); Department ofIndustry, Science and Resources (2023)

67

There is a prospect that coal plant construction in Vietnam could peakearlier (and at a lower level) than previously expected. This reflects theimpact of COVID disruptions and lack of access to funding, which haveseen proposed plants falling behind schedule. Vietnam’s energy plan calls
for an increase of 40% in coal-fired power generation capacity by 2030.
The nation could still bring about 10GW of coal capacity online, but the riskof falling short of this target has risen significantly over recent quarters.
Some import growth is still expected through the outlook period, but withcoal-fired power plant constructions becoming increasingly stalled, it islikely that a larger share of growth in the electricity generation sector after
2025 will be made up of gas and renewables.

6.4

World exports

Exports from Australia are expected to grow in 2023 as floods and rainfall
ease with the passing of La Niña. However, exports elsewhere may beconstrained by weather issues (affecting Indonesia and the US) andmilitary conflict (affecting Russia).
Indonesia’s exports are facing a new cycle of weather disruptions
Weather conditions have improved for some Indonesian miners, with theend of the La Niña cycle resulting in fewer operational disruptions. But the
emerging El Niño is bringing new difficulties, with dry weather causing
shallower drafts and river transport disruptions in Central and East
Kalimantan. A slowdown in loading and transportation backlogged about
50 vessels at the Muara Berau anchorage. Loss of depth in the Kedang
Kelapa River is affecting coal miners in surrounding areas, and falling
water levels are also affecting barging on the Barito and Mahakam Rivers.
Indonesian output is expected to remain slightly constrained in the shortterm, with El Niño conditions likely to persist for 3-4 quarters. Exports over
the outlook period are expected to edge back from 465 Mt in 2022 to 457
Mt by 2025. (Figure 6.6). Shifting demand patterns have seen prices forlower grade Indonesian coal falling relative to prices for higher grades.
This is likely to curb revenue for Indonesia’s coal sector, with export
earnings falling through and beyond the outlook period.

Resources and Energy Quarterly September 2023

The war in Ukraine has placed Russian exports under additional pressure
Russian exports — already affected by sanctions following the country’s
invasion of Ukraine — faced further trouble during the September quarter.
The conflict zone has recently expanded to encompass a larger area ofland bordering the Black Sea, with military skirmishes shutting down
activity at some ports. At other ports, insurance costs have increased, andsome shipping companies have pulled out due to risk.
Alternative routes, such as rail to the east, remain constrained by backlogs
and prioritization of other cargoes. Efforts to expand shipment capacity to
India and China have been hampered by a lack of essential equipment.
Russian suppliers are starting to face cost issues. Sanctions have reduced
Russian coal prices to under US$100 a tonne (and even under US$90 a
tonne at some points). The recent sustained weakening in the value of the
Ruble adds to the cost to replace equipment, adding further to thelimitations imposed by sanctions. The combined effect of lower prices andhigher costs is forcing higher cost Russian producers out of the thermal
coal market.
Russia is also dealing with some new weather hazards. A dam breach in
Siberia resulted in water damage to parts of the Baikal-Amur Mainline — asignificant freight rail line used to service Pacific markets. There is noprospect for coal to be transported via an alternative line given pre-existingrail backlogs and capacity shortages.
Hampered by sanctions, lower prices, and rising costs, Russian exports
are expected to fall from an already low 151 Mt in 2022 to 128 Mt by 2025.
US exports remain hampered by weather conditions and high costs
US thermal coal exports remain relatively strong, supported by higher
demand from the Middle East and Europe, and by retirements amongsome domestic coal plants. Units set to retire include AES Hawaii, Barry
unit 5, and the Guayama Puerto Rico plant.
Weather and infrastructure problems continue to hamper US efforts tocapitalise on recent high coal prices. In recent months, these disruptions

68

have included a new wave of flooding, which blocked interstate roadtransport to the Long Beach export terminal.

6.5

Structural problems with US coal (its high production cost, moderatequality and long distance from ports) are likely to reassert their influence inthe absence of high prices, bringing exports down slightly despite a likely
improvement in weather conditions.

Thermal coal prices fell sharply through the first half of 2023 but have held
generally steady from June, with a rise in recent weeks (Figure 6.7). Price
growth in the second half of 2023 is possible, with recent growth in gas
prices improving the competitiveness of thermal coal, particularly in the
Asian region. The northern winter could also add an upside to thermal coaldemand towards the end of 2023, though inventories (especially inEurope) remain strong. Most factors point to a decline in prices after 2023.
Supply has not yet fully recovered from La Niña disruptions, and there iscapacity to bring additional supply into markets over coming months.

A major Colombian port has declared force majeure
Colombia’s Puerto Bolivar coal terminal has declared ‘force majeure’
following a string of recent protests which blocked the feeder rail line
connecting the port to Glencore’s Cerrejón mine. Seven vessels with
900,000 tonnes of capacity are now sitting at the terminal waiting to beloaded. The Cerrejón mine has regularly faced protests from the traditional
owners of the land on which the mine operates, with a surge in protest
activity significantly reducing output over the last twelve months.
Although protests at the site are likely to persist, broader weather
disruptions appear to be easing following the end of the La Niña cycle.
Rain previously blocked the largest rail lines (at Cerrejón and Fenoco), but
this is now mostly resolved. Exports are expected to partially recoverthrough the rest of 2023 and 2024. However, with some mines now
permanently closed and others disrupted, it is not expected that Colombia
will reach its pre-COVID export levels.

PricesPrices have stabilised following a sustained decline

Figure 6.7: Thermal coal prices — Australian vs Indonesian
450
400
350
300
250
200
150

South African exports are facing cost pressures

100

Lower prices have begun to affect higher-cost coal producers in South
Africa, resulting in less usage of the more expensive forms of transportation.
Coal truck volumes to South African ports were down by over 30% in July
relative to January 2023. Rail transport is largely unaffected, but use of railis generally dominated by the nation’s larger/wealthier mining companies.

50

South Africa continues to press on with transportation upgrades, seeking
new equipment from China to upgrade supply chains and terminals. This is
not expected to increase exports in the near future, but supply could be
pushed up beyond the outlook period. South African exports are forecast
to hold at just under 70 Mt over the next two years.
Resources and Energy Quarterly September 2023

0
2013

2015

2017

2019

Indonesia 4,700 NAR
Newcastle 6,000kc NAR

2021

2023

Newcastle 5,500kc NAR

Source: McCloskey (2023). NAR = Net as received.

The end of the Northern Hemisphere winter will likely place downward
pressure on thermal coal demand from early 2024, and a rise in gas
supply should reduce pressure on thermal coal markets from 2025.

69

However, prices are not expected to decline to 2019 levels. A range ofstructural price pressures are likely to linger and even intensify over time.
Supply remains constrained by low capital availability, labour shortages,
loss of Russian supply following the invasion of Ukraine, and rising global
freight costs. High profits typically drive investment in extra production, but
this relationship appears to be breaking down for thermal coal, with coalminers instead seeking to pay down debt, expand dividends, and engage
in share buybacks.

6.6

The price differential between high and low-grade thermal coal has
contracted in recent quarters (Figure 6.8) but is expected to grow again as
demand for lower calorific thermal blends loses steam. Chinese demand
pivoted towards lower grade Indonesian coal following the commencementof trade impediments targeting Australia. However, Chinese buyers are
shifting back towards traditional mixes as trade resumes between thenations.

Mine expansions and closures are expected to largely balance out over
the outlook period. Whitehaven’s Vickery project is expected to proceed
soon, after the company stated that $150 million would be used to start upa small-scale version of the mine. Output will be limited to about 15% ofthat originally mooted, but the board retains an option to lift output to theoriginal level (about 8 Mt annually) at a cost of about $1 billion. A decisionon the capacity upgrade will likely be made by early 2024.

Price risks remain somewhat balanced. Thermal coal demand faces
downside risks, with weaker Chinese recovery and a mild Northern
Hemisphere winter potentially constraining coal use. However, weather
disruptions and potential summer storms could impact on the supply side,
potentially pushing prices up. Price risks remain on the upside over the
longer term because structural decline in supply is likely to lead declines indemand. However, both supply and demand are expected to remain
relatively steady and well-matched over the near-term part of the outlook
period.

Figure 6.8: Prices for thermal and low-grade coking coals

Coal prices are expected to converge towards costs in some producing
nations over the outlook period, as prices edge down and capital andlabour shortages push costs up. If costs rise significantly over coming
years, this will effectively place another floor under coal prices.
The 6,000 kcal Newcastle coal price is expected to decline from just under
US$180 a tonne over 2023 to around $US115 a tonne by 2025. This is still
well above the 2019 average (of US$76 a tonne), and prices retain
significant potential to vary in either direction.

Resources and Energy Quarterly September 2023

Australia

Australian thermal coal export volumes are set to rise
Australian thermal coal exports remain in high global demand, but supply
disruptions have hampered capacity to meet it. These disruptions haveincluded COVID-19 impacts, weather issues, and labour shortages.
Labour issues are expected to grow over time, but thermal coal output isstill expected to recover in the short-term as weather conditions improve.

700

US$ a tonne

600
500
400
300
200
100
0
Jan-21

Jul-21

Jan-22

Newcastle basis 6,000kc NAR
Australian semi-soft cc
MCC2 Australian mid-vol PHCC

Jul-22

Jan-23

Jul-23

Newcastle 5,500kc NAR
Australian LV PCI

Source: McCloskey (2023)

70

A number of thermal coal mines are scheduled to close over the coming
years as deposits run short or become too costly to operate. These include
Muswellbrook, Bloomfield and Springvale in NSW, with the Newlands minein Queensland having already closed earlier in 2023.
Access to finance continues to constrain coal investment, with banks andsome large, diversified miners shifting away from exposure to thermal coalmarkets. With prices now lower, other forms of finance could also
withdraw, constraining capital spending for the thermal coal sector. This
lack of new investment could see thermal coal output/exports start to fallbeyond the outlook period, though the exact rate of decline is unclear.
The flow of thermal coal exports to China continues to rise following theremoval of informal trade restrictions imposed by the Chinese
Government. Exports to China grew from nil in December 2022 to 6.4 Mt
by June 2023, exceeding the average monthly level of 2019 (4.2 million
tonnes). In value terms, thermal coal exports to China exceeded $1 billion
in June, marking a new record. (Japan — traditionally the largest export
market for Australian thermal coal — was pushed to second place inJune.) This rapid growth may start to ease over coming months in line withbroader Chinese coal usage.

Figure 6.9: Australia’s thermal coal exports
250

75

200

60

150

45

100

30

50

15

0

2018–192020–21
Volumes2022–23
2024–25
Export values

A$ billion

In Queensland, the Carmichael mine is now mostly ramped up, withshipments to eastern ports of India now occurring on a regular schedule.
Around 7 million tonnes were shipped over the 12 months to March 2023,
with Adani building towards a 12 million tonne annual target.

decline in export values from $65 billion in 2022–23 to $28 billion by2024–25.

Million tonnes

New Hope has announced that the stage 3 extension for its New Acland
mine has been completed. Production at the site is expected torecommence in the September quarter following a $556 million investmentby the company. Output at the mine is expected to ramp up steadily,
reaching 5 Mt annually from 2025.

0

Source: ABS (2023); Department of Industry, Science and Resources (2023)

Revisions to the outlook for Australian thermal coal exports
The forecast for export earnings has been revised down by around$2 billion in 2023–24 and 2024–25 from the June REQ. The results reflect
a slight weakening in global demand conditions flowing through to lower
prices over the outlook period.

On balance, it is expected that export volumes will grow through theoutlook (Figure 6.9) as weather conditions improve and output ramps up atseveral mines. Thermal coal exports are forecast to rise from 182 Mt in
2022–23 to 203 Mt by 2024–25. Ebbing prices are expected to lead to a

Resources and Energy Quarterly September 2023

71

Table 6.1: World trade in thermal coal
Annual percentage change

Unit

2022

2023s

2024f

2025f

2023s

2024f

2025f

Mt

1,043

1,017

1,019

1,026

-2.5

0.1

0.7

Asia

Mt

796

849

851

863

6.6

0.3

1.4

China

Mt

231

222

210

200

-3.9

-5.2

-4.8

India

Mt

153

181

190

209

17.8

4.9

10.0

Japan

Mt

138

138

137

136

0.0

-0.9

-0.8

South Korea

Mt

91

91

91

90

0.0

-0.5

-0.5

Taiwan

Mt

61

61

60

59

0.0

-1.1

-2.5

Indonesia

Mt

465

462

459

457

-0.7

-0.5

-0.4

Australia

Mt

179

196

202

203

9.5

3.5

0.4

Russia

Mt

151

133

130

128

-12.0

-1.7

-1.5

Colombia

Mt

54

56

59

59

2.7

5.4

0.0

South Africa

Mt

67

68

68

69

1.5

-0.6

1.3

United States

Mt

35

36

36

36

4.6

0.1

-0.6

World trade
Thermal coal imports

Thermal coal exports

Notes: f Forecast s Estimate
Source: International Energy Agency (2023); IHS Markit (2023); Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

72

Table 6.2: Thermal coal outlook
Annual percentage change
Unit

2022

2023s

2024f

2025f

2023s

2024f

2025f

– nominal

US$/t

395

200

160

132

-49.4

-20.0

-17.6

– realc

US$/t

410

200

156

126

-51.2

-22.1

-19.3

– nominal

US$/t

359

176

135

115

-51.0

-23.1

-15.1

– reale

US$/t

375

176

132

109

-53.1

-25.2

-16.8

Australia

Unit

2021–222022–23

2023–24 f

2024–25 f

2022–23

2023–24 f

2024–25 f

Production

Mt

236

216

252

253

-8.6

16.8

0.4

Export volume

Mt

196

182

202

203

-7.4

11.2

0.5

– nominal value

A$m

46,25865,511

36,23028,463

41.6

-44.7

-21.4

– real valueh

A$m51,52868,18536,23027,564

32.3

-46.9

-23.9

World
Contract pricesb

Spot pricesd

Notes: b refers to benchmark Japanese Fiscal Year 6322kcal GAR thermal coal contract reference price; c In current JFY US dollars; d fob Newcastle 6000 kcal net as received; e In 2023 US
dollars; f Forecast; h In 2023–24 Australian dollars; s estimate
Source: ABS (2023) International Trade in Goods and Services, Australia, Cat. No. 5368.0; IHS (2023); NSW Coal Services (2023); Queensland Department of Natural Resources and Mines(2023); Company Reports; Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

73

74

7.1
•

Summary
Australia’s LNG export revenues hit a record high of A$93 billion in
2022–23 but are forecast to ease to A$71 billion in 2023–24 as the spikein global energy prices set off by the Russia/Ukraine war unwinds.

•

Asian LNG spot prices stabilised at around US$12 per MMBtu over the
September quarter as European storage inventories neared capacity.
Volatility increased marginally at the end of the quarter due to industrial
action (since resolved) at Australian export facilities.

•

Global LNG markets are likely to tighten over the December and March
quarters as winter in the Northern Hemisphere raises gas demand forspace heating.

7.2

World trade

Trade grows as European and South East Asian demand surges

to that of Australian facilities (see Table 7.1). Beyond the outlook period,
these new North American facilities could begin to erode Australia’s
market share in North-East Asia.
Over the short term, there is a high likelihood that European gas storage
inventories will reach full capacity before the onset of the Northern
Hemisphere winter. This could result in a (short-lived) LNG glut between
the shoulder of the September and December 2023 quarters. However,Europe’s storage inventories are only capable of meeting a third of thecontinent’s winter gas demand, and the occurrence of El Niño conditions in
the Pacific makes it more likely that Northern Europe will face a colder anddrier winter. As such, LNG demand is likely to remain robust across the
December and March quarters, which in turn will support healthy demand
over the summer refilling period in 2024.

Figure 7.1: Global LNG demand growth forecasts, 2020–25

Global LNG trade is expected to grow rapidly by 13% or 52 million tonnes(Mt) over the next two years, reaching 455 Mt by 2024–25. While NorthEast Asia will remain the centre of gravity in the global LNG trade —importing 208 Mt (just under half of all global volumes) — it will no longer
be the engine of global growth.

Roughly half of the growth in the world LNG trade (26 Mt) over the forecast
period will be supplied from newly commissioned US LNG facilities in the
Gulf of Mexico, while Russia and Nigeria will contribute 9 Mt and 7 Mt,
respectively (Figure 7.2). Critically, two new LNG facilities will be
constructed by 2025 on the west coast of North America (in Canada and
Mexico) whose distance from Northeast Asian markets will be comparable

Resources and Energy Quarterly September 2023

40
30
Million tonnes

Europe is now forecast to be the driver of global demand over the outlook
period, as the region continues to replace Russian pipeline gas with LNG.
European imports are forecast to grow by 17 Mt to 140 Mt by 2025, while
ASEAN, Australia’s closest export market, will become the second largest
source of demand growth. ASEAN’s imports are forecast to rise by 11 Mt
by 2025 — which will represent a doubling of the region’s imports in justunder three years (Figure 7.1).

50

20
10
0
-10
-20
-30

2020
Japan
Europe2021

2022
South Korea
South Asia

2023
2024
2025
China
ASEAN
Rest of worldNotes: 2020, 2021 and 2022 figures based on historical data.
Source: Department of Industry, Science and Resources (2023), Nexant ECA (2023)

75

Figure 7.2: Global LNG supply growth forecasts, 2021–25

Figure 7.3: European storage inventories, 2021–23
100

40

90
80
70

20
Per cent

Million tonnes

30

10
0

60
50
40
30
20

-10

10
-20

2020

2021

United States
Qatar

2022

RussiaMalaysia

2023
Australia
Indonesia

2024

2025

AfricaRest of worldNotes: 2020, 2021 and 2022 figures based on historical data.
Source: Department of Industry, Science and Resources (2023); Nexant ECA (2023)

7.3

World imports

European imports break quarterly record as inventories approach capacity
European LNG imports broke an all-time record in the June quarter 2023,
hitting 31 Mt. This represented 8% year-on-year growth in Europe’s
imports and can be largely attributed to the rapid build-out ofregassification terminals since Russia’s invasion of Ukraine.
The steady flow of LNG imports has helped buttress Europe’s gas
inventories, which were at 94% capacity as of 11 September (Figure 7.3).
Inventories are now forecast to reach 100% by the beginning of the
December quarter, assuming future injections are in line with the historical
averages.

Resources and Energy Quarterly September 2023

0

Jan Feb Mar Apr May Jun
2021

2022

Jul Aug Sep Oct Nov Dec
2023

Five-year average

Note: Five-year average calculated between 2016 and 2020. Dotted blue line is a forecast.
Source: Bloomberg (2023); Eurostat (2023).

While Australia does not export significant volumes of LNG to Europe,
Europe is a significant global consumer of LNG. Europe is Asia’s primary
competitor for flexible LNG cargoes, which means price pressures in theEuropean market can be transmitted to Asian LNG markets through buyer
competition and vice versa.
Over the two-year outlook period, Europe is forecast to capture the largest
share of the world’s growing LNG supply (Figure 7.1). The continent’s
imports are forecast to grow from 112 Mt in 2022 to 140 Mt by 2025 asGermany, Belgium, Italy, and Greece commission new LNG importfacilities to offset the loss of Russian pipeline gas supply. Europe has had
to rely heavily on LNG imports since Russia began curtailing thecontinent’s pipeline gas supply in 2022 (see Russia section). European
imports of LNG rose by 66% in 2022, from 68 Mt in 2021 to 112 Mt (Figure
7.4).

76

14
13
12
11
10
9
8
7
6
5
4

Figure 7.5: China’s monthly LNG imports, 2020–2023
98Million tonnes

Million tonnes

Figure 7.4: European LNG imports, 2020–23

7
6
5
4

Jan Feb Mar Apr May Jun
2023

2022

Jul Aug Sep Oct Nov Dec
2021

2020

Source: Kpler (2023)

China’s imports to remain flat out to 2025
Chinese LNG demand rebounded noticeably in the June quarter 2023 asglobal LNG prices began to ease. China’s quarterly imports were 20%
higher year-on-year at 17 Mt. Higher spot prices over the previous
financial year had weighed on China’s gas use for electricity generationand created strong incentives to on-sell surplus contracted volumes toEuropean buyers (Figure 7.5).
In 2022–23, Australia exported an estimated 22 Mt of LNG to China, down
25% on 2021–22. However, the lower volumes were more than offset byhigher energy prices, which pushed up Australia’s China earnings to
A$20 billion, only marginally below earnings in 2021–22 of A$21 billion.
China is the second largest destination for Australian LNG (by volume andvalue), and Australia remains China’s largest source of LNG, accounting
for one-third of its LNG imports since 2020.
China’s LNG demand is forecast to remain flat at 70 Mt over the two-year
outlook period. A larger proportion of Chinese gas demand is likely to beserviced by pipeline imports from Russia and slower economic growth will
weigh on gas demand more generally (See China box).
Resources and Energy Quarterly September 2023

3

Jan Feb Mar Apr May Jun
2023

2022

Jul Aug Sep Oct Nov Dec
2021

2020

Source: Kpler (2023)

The increase in pipeline deliveries is the result of Russia ramping up flows
along the Power of Siberia 1 pipeline. These flows are expected to peak at
24 billion cubic meters per year in 2024, with capacity on the pipeline
having increased by 50% since 2022. The higher flows come off the backof Russia’s successful commissioning of the Kovykta field in Irkutsk, Far
Eastern Siberia.
Unlike other Asian countries, China is not wholly reliant on LNG for its gas
needs. China has the world’s seventh largest proven gas reserves, andthe largest unconventional reserves after the US. China's geography also
allows for the importation of natural gas via pipeline from large gas
producers in Russia (to its north) and Central Asia (to its West).
Japan’s LNG imports fall in June as nuclear power ramps up
Japanese LNG imports fell 18% year-on-year in the June 2023 quarter to
14 Mt (Figure 7.6). The result marks Japan’s lowest quarterly LNG imports
in over 15 years and can be largely attributed to the restart of several
nuclear reactors which displaced gas-powered generation in Japan’s
electricity market (see Uranium chapter).

77

Figure 7.6: Japan’s monthly LNG imports, 2020-2023

Figure 7.7: Korea’s monthly LNG imports, 2020-2023
6

95
Million tonees

Million tonnes

8
7
6
5

4
3

4
3

Jan Feb Mar Apr May Jun
2023

Jul Aug Sep Oct Nov Dec

2022

2021

2

Jan

Feb Mar

2020

Apr May Jun

2023

2022

Jul

Aug Sep
2021

Oct

Nov Dec

2020

Source: Kpler (2023)

Source: Kpler (2023)

Despite the fall, Japan remains the largest destination for Australian LNG.
In 2022–23, Australia exported an estimated 29 Mt of LNG to Japan worth
about A$16 billion, roughly 37% of Australia’s total LNG revenues.
Australia is also Japan’s largest source of LNG, accounting for 40% of
LNG imports since 2020.

The Ministry of Trade, Industry and Energy is prioritising support for
nuclear power and hydrogen. The 10th Basic Plan aims to lift nuclear
energy’s share of total power generation from 27% to 30% by building
additional plants and extending the lifespan of existing plants. The planalso includes a proposal to lift hydrogen targets in co-fired gas power
generation. This could lead to the share of LNG in the energy mix
decreasing from 29% in 2021 to 23% by 2030.

Japan’s LNG imports are forecast to fall to 73 Mt in 2023 and remain atthat level through to 2025 as gas-powered generators face increased
competition from nuclear and coal-fired power. According to Japan’s
Ministry of Energy, Trade and Industry, the share of total electricity
generation supplied by gas may fall from 38% in 2022 to 27% by 2030,
with the share of nuclear power lifting from 6% to 22%.
South Korean imports likely to soften as nuclear power generation rises
South Korea’s LNG imports were relatively stable, rising by 3.5 per centyear-on-year in the June quarter 2023 (Figure 7.7). Australia accounts forabout 25% of South Korean LNG imports and has been its largest sourceof LNG since 2020. South Korean LNG demand is forecast to be relatively
flat at 41 Mt annually out to 2025.
Resources and Energy Quarterly September 2023

ASEAN, led by Thailand, pivots to LNG
ASEAN is forecast to be the second fastest growing market for LNG after
Europe. LNG import demand is forecast to rise by 63% from 19 Mt in 2023
to 30 Mt in 2025 (Figure 7.1). To date in 2023, Thailand has imported 1.9
Mt from Australia, setting a record for imports within a half-year period.
Thailand’s share of Australian LNG exports grew year-on-year from 2.9%
to 5% in H1 2023, surpassing Singapore as the fifth largest destination forAustralian LNG (Figures 7.8-9). The Philippines received its first LNG
cargo in April, and Vietnam announced plans to boost renewable and
LNG-powered gas generation capacity as part of its Power Development
Plan 8.
78

Previously, Indonesia was reported to have been considering limiting LNG
exports to safeguard domestic supply needs. Since then, the Coordinating
Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan,
clarified there are no plans to ban LNG exports, but has not ruled out
measures to prioritise domestic consumption.

Figure 7.8: ASEAN LNG imports by destination, 2020–23
2.5
2.0
Million tonnes

Despite the increasingly important role of LNG in energy security, ASEAN
countries have signalled their intention to continue expanding domestic
supply through investment in exploration and upstream production.
National oil companies, including Petronas (Malaysia), PTTEP (Thailand)
and the Philippines’ Department of Energy expect to accelerate the drillingof new production wells, with PTTEP’s Montri Rawanchaikul stating that’every single Btu of gas counts’.

0.0
Jan-20Resources and Energy Quarterly September 2023

Jul-21

Jan-22Singapore Republic
Philippines

Jan-21

Malaysia
Vietnam

Jul-22

Jan-23

Jul-23

Indonesia

Source: Kpler (2023)

Figure 7.9: Monthly ASEAN LNG imports by source, 2020–23
100%
90%
80%
70%
Per cent

While the region’s long-term demand for LNG is forecast to surge, current
demand is outpacing the region’s contracted LNG positions, lifting South
Asia’s reliance on the spot market. This is prompting buyers to sign longterm contracts. For example, the Indian Oil Corporation recently
announced it had signed two long-term agreements with ADNOC LNG(UAE) for 1.2 Mtpa over 14 years, and TotalEnergies for 0.8 Mtpa over 12
years, both commencing in 2026. Pakistan and Bangladesh have also
signed long-term agreements with Azerbaijan and Oman, respectively.

Jul-20ThailandMyanmarSouth Asia looking to secure more long-term supply
Only a marginal amount of South Asia’s LNG is imported from Australia,
with most delivered from the Gulf region due to its proximity — it takes
approximately two days to ship a cargo of LNG from Ras Laffan in Qatar to
Gujarat in India (see Table 7.1). South Asia’s LNG demand is forecast to
rise by 14% to 43 Mt by 2025, driven by gas-fired power generation.

1.0
0.5

Taiwan’s imports to rise
Taiwan’s LNG imports rose by 27% year-on-year in H1 2023. Australia is
Taiwan’s largest supplier of LNG, accounting for over 40% of Taiwan’s
LNG supply. The majority of LNG is used for power generation and isforecast to rise to 23 Mt in 2025 as new gas-fired generation capacity
replaces nuclear power under Taiwan’s long-term decommissioning plan.

1.5

60%
50%
40%
30%
20%
10%
0%
Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23
Australia
Qatar
Malaysia
United States
Brunei
Other

Source: Kpler (2023)

79

Despite the Indian government’s stated intent to pivot the nation to a gasbased economy, the Ministry of Power’s 2022–32 National Electricity Planomits new investment in gas-fired power, instead opting to lift renewable
and coal-fired capacity (see Thermal coal chapter). If price volatility forcommodities and input materials persists, and if financial health remains
poor, these issues could extend South Asia’s heavy reliance on coal.

7.4

World exports

US takes place as the largest LNG exporter in 2023
US LNG exports remained high year-on-year at 41 Mt in H1 2023 (Figure7.10), edging out Qatar and Australia as the top exporter. Over 80% of US
LNG was exported to Europe in the year to the June quarter 2023, and thetrend is expected to hold over the outlook period as Europe further cuts its
reliance on Russian pipeline gas.

Figure 7.10: US LNG Exports, 2020–2023
8

Million tonnes

7

With Europe capturing a larger share of US LNG, exports to Asia
decreased by 25% year-on-year (Figure 7.11). This trend is likely to persist
given severe drought conditions affecting the Panama Canal — the majorroute for Asia-bound US LNG cargoes. With drought conditions impacting
water levels in the Panama Canal, increased bottlenecks have led todiversions via the Cape of Good Hope, raising shipping costs and times toAsia (Table 7.1).
By the end of the outlook period, North American West Coast LNG
projects are set to intensify competition in the Asia-Pacific market. The
Canada and Saguaro Energía (Mexico Pacific) LNG projects (both with
nameplate capacity of 28 Mt) are scheduled for completion by 2025. In
contrast with American projects in the Gulf of Mexico, these projects willtake advantage of significantly reduced shipping times and costs into
Asian markets, avoiding transit risks associated with the Panama Canal(see Table 7.1). The prospects for growth, underpinned by the relatively
low cost of production and comparable shipping times to Asia, will liftcompetition with Australian LNG by the end of the outlook period.

Table 7.1: Average LNG Shipping Duration, by LNG region

6
5

Days

4

China
(Shanghai)

Japan(Tokyo)Korea(Incheon)

India(Gujarat)

3

Western Australia

8

7

8

9

2

Queensland(Australia)

8

9

9

14

US Gulf Coast (viaPanama Canal)

20

22

21

21

US Gulf Coast (viaCape of Good Hope)

36

34

35

24

American West Coast

10

9

9

19

Qatar (Ras Laffan)

14

12

13

2

1
0

Jan Feb Mar
2023

Apr May Jun
2022

Jul Aug Sep Oct Nov Dec
2021
2020

Source: Kpler (2023)

Record levels of cargoes from US LNG export facilities were reported in
the first six months of 2023, as Freeport LNG restarted production after an
extended outage in 2022. US LNG exports are forecast to reach 85 Mt by
the end of 2023 and 109 Mt over the outlook period, as Golden Pass,
Plaquemines and Corpus Christi Stage 3 come online.
Resources and Energy Quarterly September 2023

Notes: Days shipping is based on a vessel at maximum speeds of 19.5 knots.
Source: WA Department of Jobs, Tourism, Science and Innovation based on information from
Shipscene and the International Group of LNG Importers (GIIGNL). US Gulf Coast (via Capeof Good Hope) and North American West Coast estimated from S&P and Shell reports.

80

Figure 7.11: Monthly US LNG exports by destination, 2020–23
8
7

Russia is seeking to address some of these constraints over the next few
years, and Russia’s LNG exports are forecast to increase from 31 Mt in
2023 to 39 Mt in 2025 (Figure 7.1). Russia only has two LNG terminals:
Yamal LNG, which supplies Europe, and Sakhalin LNG, which supplies
Asia from Russia’s far east (Figure 7.12). Russia is currently constructing athird large scale LNG facility, Arctic LNG-2, which is forecast to start
producing by the end of the year.

5
4
3
2
1
Jul-20Jan-21

Asia (ex China)
Middle East

Jul-21

Jan-22

China
North America

Jul-22

Jan-23

EuropeSouth America

Source: US Energy Information Agency (2023)

Larger Qatari volumes on the horizon
The volume of Qatari exports has been stable at approximately 80 Mt for
the last decade. The Qatari Government has repeatedly stated that Qatar
cannot materially boost its LNG supply in the short term, despite highprices and strong global demand for LNG.
In the coming years, Qatar is projected to expand its LNG export capacity
by constructing six additional LNG trains at Ras Laffan. The new trains,
fuelled with gas from Qatar’s North Field East, are projected to raise
Qatar’s LNG exports from 79 Mt in 2023 to 105 Mt by 2026. Demand for
Qatar’s new volumes has been high, with Qatar’s Energy Minister, Saad
Bin Sherida Al-Kaabi, predicting that all the new volumes will becontracted out by the end of 2023.
Russian gas stranded and unlikely to be redirected during outlook period
After Russia invaded Ukraine in February 2022, the nation began to
repudiate its contractual obligations to supply Europe with pipeline natural
Resources and Energy Quarterly September 2023

Russia is also expected to commence construction of the Power of Siberia
2 pipeline in 2024. When the pipeline is completed after 2029, it will allow
stranded Russian gas from Western Siberia to be sold into the Chinese
market. But even if Russia can build the pipeline in the face of adepreciating currency and heavy sanctions on machinery and equipment,
it will only be able to transport one-third of the volumes (around 50 bcm)
previously exported via pipeline to Europe.

Figure 7.12 Russian LNG exports by destination, 2020–23
3.0
2.5
Million tonnes

Million tonnes

60
Jan-20gas. Russia has historically been the world’s largest natural gas supplier,but a large portion of its gas is now stranded as infrastructure constraints
prevent Russia from redirecting the gas elsewhere (see China box).

2.0
1.5
1.0
0.5
0.0
Jan-20Jul-20Jan-21

Jul-21
Jan-22
Asia
EuropeJul-22

Jan-23

Notes: Russia has two LNG facilities: Yamal in Europe and Sakhalin in Asia. Russia can only
economically redirect European imports to Asia during the Northern Hemisphere winter.
Source: Kpler (2023)

81

7.5

PricesPrices moderated over the September quarter
Global LNG prices picked up mildly in the September quarter as countries
rebuilt their gas storage inventories following a mild 2022-23 Northern
Hemisphere winter. Prices averaged a relatively low US$12 per MMBtu
over the quarter, compared to US$19 per MMBtu over the same period in
2022 (Figure 7.13).
Prices edged up to US$12 per MMBtu in July as summer cooling demand
picked up in Northern Asia, before eventually subsiding back to the US$11
band in early August. However, unease over industrial action (sinceresolved) across two of Australia’s largest LNG production facilities saw
prices edge back up to US$13 per MMBtu over the month of September.

El Niño-type conditions have already made some impact, with gas demandin parts of Europe surging due to summer heatwaves with anticipated
implications for the upcoming Northern Hemisphere winter. Despite
occurring in the Pacific Ocean, El Niño can impact Europe’s climate byshifting global jet streams south. As jet streams shift southwards, rain
clouds from the Atlantic make landfall closer to southern Europe, which
can leave Northern Europe exposed to drier and colder winter conditions.
Beyond the upcoming winter, prices are forecast to average
US$15/MMBtu in 2024 (assuming normal Northern Hemisphere winterconditions) before easing in 2025 to US$13/MMBtu, as new liquefaction
facilities come online in the United States (Figure 7.13).
Key risks to the forecast include the intensity of the coming Northern
Hemisphere winter, which is skewed to the upside due to the evolving El
Niño conditions and any unplanned outages that could disrupt global LNG
supply.

Figure 7.13: LNG spot and contract prices, 2019–25

LNG spot prices in Asia are forecast to rise to US$15/MMBtu over the
December quarter as winter heating demand rises (Figure 7.13). However,there remains a distinct possibility that once European inventories are full,global markets will experience a temporary glut until the seasonal
conditions change.
The outlook for prices beyond the December quarter remains uncertain
and will largely be shaped by seasonal conditions. Northern Hemisphere
winter gas demand will influence the level of European LNG imports
needed to refill its inventories over 2024, which could increase competition
for spot LNG cargoes in the Asian market. Futures contracts for thedelivery of LNG into Asia over the December 2023 and March 2024
quarters are currently priced at US$15 and US$18 per MMBtu,
respectively.

Resources and Energy Quarterly September 2023

US$ per MMBtu

Asian LNG spot prices to remain volatile until 2025

60

120

45

90

30

60

15

30

0
2019

2020
2021
2022
ANEA LNG spot price
Brent crude oil (rhs)2023

US$ a barrel

Risks to the Russian forecast remain skewed to the downside, due to theimpact sanctions may have on Russia’s ability to sustain existing LNG
facilities — let alone construct new ones — given LNG facilities’ relianceon sophisticated technology.

0
2024
2025
Indicative oil-linked contract priceSource: Bloomberg (2023); Department of Industry, Science and Resources (2023)

82

High oil prices continue to support LNG contract earnings
The price of oil is important for Australia’s LNG earnings. Around 80% ofAustralian LNG exports are sold under long-term contracts that link theprice of LNG to the Japanese Customs-Cleared Crude (JCCC) oil price(with a 3-6 month lag, depending on contractual arrangements). Oil-linked
LNG contract prices are forecast to average US$13/MMBtu in the 2023 to2025 period, based on an oil price of US$83 per barrel (Figure 7.13).
Since 2021, oil-linked contract prices have been selling at a discount tospot prices. However, in May 2023 this trend was reversed, with the OCE’s
indicative oil-linked contract price achieving parity to LNG spot prices.
Between 2021 and 2022, higher relative spot prices incentivised buyers
holding contracts with Australian facilities to increase LNG volumes bought
under their agreements; both to limit their exposure to spot markets andarbitrage the differential between the two prices.

7.6

Australia

Australia’s LNG export volumes ease amidst retrofits
Australia exported 19 Mt of LNG in the June quarter 2023, compared to
20 Mt in the same quarter last year. The decline was due to maintenanceat Pluto and Gladstone LNG, and the winding down of operations at
Darwin LNG. Lower export volumes from those two operations werepartially offset by higher production from QCLNG on the East coast, andfrom Prelude FLNG on the West Coast.
Santos reported Darwin LNG’s production cease in mid-2023, with the lastcargo shipped in June. Woodside installed new infrastructure at Pluto LNG
to enable the facility to process new gas from the Scarborough Field,
temporarily weighing on output. Santos’s East Coast facility, Gladstone
LNG, also underwent maintenance in June, and the company is reported
to have reduced its output to ensure greater volumes of natural gas wereavailable to the domestic market during peak winter heating demand.
Quarterly production from Prelude FLNG is estimated to have reached its
highest level since the facility commenced operations in 2019, with output
estimated at just under 1 Mt of LNG in the June quarter 2023. Chevron
Resources and Energy Quarterly September 2023

commenced production from Gorgon Stage 2 in the June quarter 2023.
The project involved the installation of 11 additional wells in the Gorgonand Jansz-lo fields off the coast of West Australia.
Ichthys LNG is expected to ship a record 132 LNG cargoes in 2023, up
18% from 112 cargoes in 2022, as it starts working on debottlenecking thefacility to boost production. The project aims to build a framework capableof a stable supply of 9.3 Mtpa in 2023, by upgrading cooling systems forliquification and taking measures against vibration.
Workers at the West Coast’s Gorgon and Wheatstone LNG facilities
launched industrial action during the month of September, temporarily
affecting spot prices. The parties reach a successful resolution to thedispute after the Fair Work Commission released a series ofrecommendations without any material impact on Australia’s LNG exports.
Australian volumes to ease as Darwin LNG goes offline
Australia is forecast to export 81 Mt of LNG in 2023–24, slightly lower
compared to 2021–22 (82 Mt), as Darwin LNG suspends production while
being backfilled from the Barossa field. Volumes are forecast to fall 2 Mt to79 Mt in 2024–25, on lower North West Shelf output (Figure 7.14).
Several projects are underway that are likely to support Australianproduction over the longer term. These projects include Woodside’s
Scarborough Gas Project which will provide additional feedgas to Pluto
LNG’s second liquefaction train; Santos’ Barossa Gas Project which will
backfill Darwin LNG; INPEX’s Ichthys upgrade which will boost its output;
and Tamboran Resources’ recently proposed NTLNG facility, which would
produce LNG alongside the Darwin and Ichthys LNG facilities in Darwin.
Woodside is progressing with its Scarborough and Pluto train 2 projects,
which are now 38% complete. First LNG shipments from Pluto’s new train
are targeted to begin in 2026. Santos has also reported that the Barossa
backfill of Darwin LNG continues apace, with the project now 60 per centcomplete. However, drilling operations remain suspended pending anassessment of their environmental plan by the regulator. Santos istargeting first production to begin in 2025.

83

100

100

80

80

60

60

40

40

20

20

0

0

A$ billion

Million tonnes

Figure 7.14: Australia’s LNG exports by value and volumecommodity prices (Figure 7.14). Key risks to the forecast include seasonal
demand fluctuations that could raise spot sales earnings and OPEC
production cuts that could increase prices sold under oil-linked earnings.
Exploration expenditure remains subdued despite high energy prices
Exploration expenditure fell by 21 per cent from $1.1 billion in 2021–22 to$907 million in 2022–23 (Figure 7.16). Expenditure in the June quarter
2023 fell slightly to $230 million, down 6% year-on-year. The declines
were driven by weaker offshore expenditure (which fell by 21 per centyear-on-year to $84 million), partly offset by onshore expenditure which
increased by 5% to $145 million. Despite high energy prices, explorationand development have not lifted: higher operational and labour costs areconstraining producers’ profit margins, discouraging prospective work.

Figure 7.16: Petroleum expenditure, extraction and exploration
7

60

6

50

5

40

4

30

3

20

2

Australia LNG earnings at record levels in 2023, but falls are likely

101

Australia’s LNG earnings increased by 31% in 2022–23: to A$93 billion
from A$71 billion in 2021–22. Australian LNG export earnings in the Junequarter 2023 fell to A$18 billion, down 23% from the March 2023 quarterand 11% year-on-year after several quarters of record earnings. The highearnings were driven by record spot LNG and oil price-linked contract
prices in the second half of 2022, with prices since falling sharply.

00
2010–11 2012–13 2014–15 2016–17 2018–19 2020–21 2022–23
Extraction
Exploration (rhs)

2016–17

2018–192020–21

Volume2022–232024-25

Value (rhs)

Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department ofIndustry, Science and Resources (2023)

Australia's LNG earnings are forecast to decline over the outlook period as
global energy markets continue to reorganise in response to the fallout
from Russia's invasion of Ukraine. Earnings are forecast to fall to A$71
billion in 2023–24, easing to A$63 billion in 2024–25 due to lower
Resources and Energy Quarterly September 2023

A$ billion

70

A$ billion

Tamboran Resources has announced a proposal to construct a new LNG
plant in Darwin (NTLNG) by 2030. The proposed plant would have an
initial nameplate capacity of 7 Mt per year, with feedgas sourced from the
Beetaloo Basin. Tamboran Resources has signed a non-binding
Memorandum of Understanding (MOU) with both Shell and BP for 2.2
Mtpa over 20 years.

Notes: Extraction expenditure consists of all expenditure on buildings and structures, plantand machinery equipment associated with Oil and Gas extraction.
Source: Australian Bureau of Statistics (2023) Private New Capital Expenditure and Expected
Expenditure, 5625.0; and Mineral and Petroleum Exploration, 8412.0

Revisions to the outlook
Australian LNG export earnings for 2023–24 and for 2024–25 have beenrevised up by A$2 billion, on account of higher oil prices, which will lift thevalue of Australia’s LNG export earnings.
84

Table 7.2: Gas outlook
Unit

2022

2023

2024

2025

Annual Percentage Change
2023
2024g
2025g

– nominal

US$/bbl

102.7

85.0

83.6

76.9

-17

-1.7

-8

– reali

US$/bbl

107.2

85.0

81.3

73.3

-21

-4.4

-10

– nominal

US$/MMBtu

33.2

13.6

14.9

13.1

-59

10

-12

– real

US$/MMBtu

34.7

13.6

14.5

12.5

-61

7

-14

LNG trade

Mt

e

385.3

403.2

425.5

455.6

5

5.5

7.1

Gas production

Bcm

4,057

4,038

4,132

4,214

-0.5

2.3

2.0

Gas consumption

Bcm

4,044

4,036

4,132

Australia

Unit

2021–222022–23

2023–24

2024–25

2022–23

2023–24

2024–25g

Productionb

Bcm

162.0

164.5

164.0

158.4

1.5

– 0.3

– 3.4

– Eastern market

Bcm

59.5

57.8

57.4

54.3

– 2.9

– 0.6

– 5.4

– 1.1

– 4.7

World
JCCC oil pricea

g

g

g

g

Asian LNG spot priceh,i– Western market

4,223
g

-0.2
g

2.4
g

2.2
g

Bcm

85.6

91.0

90.0

85.8

6.3

d

Bcm

16.8

15.1

16.3

17.3

– 10.38.2

6.1

LNG export volume

Mte

83.2

81.5

81.3

78.7

– 2.0

– 0.3

– 3.2

– nominal value

A$m$70,571$92,261$71,235$62,678

31

-23

-12

A$m

$78,612$96,026$71,235$60,699

22

-26

-15

– nominal value

A$/GJ

16.1

21.4

16.6

15.1

33.4

– 22.6– 9.1– real value

A$/GJ

17.9

22.3

16.6

14.6

24.7

– 25.6– 12.0– nominal value

US$/MMBtu

12.3

15.2

11.9

11.5

23.8

– 22.1– 2.9– real value

US$/MMBtu

13.7

15.9

11.9

11.2

15.7

– 25.1– 6.0– Northern market– real valuef

LNG export unit value

h

f

i

Notes: a JCCC stands for Japan Customs-Cleared Crude; b Production includes both sales gas and gas used in the production process (i.e., plant use) and ethane; c Gas production from BayuUndan Joint Production Development Area is not included in Australian production; d Browse basin production associated with the Ichthys project is classified as Northern market; e 1 Mt of LNG isequivalent to approximately 1.36 bcm of gas; f In 2023–24 Australian dollars; g Forecast; h 1 MMBtu is equivalent to 1.055 GJ; i In 2023 US dollars; r Average annual growth between 2021 and2027 or 2020–21 and 2026–27; s Estimate; z Projection.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department of Industry, Science and Resources (2023); Company reports; Nexant (2023) World Gas Model.

85

86

87

8.1

Summary The Brent crude oil price is expected to average US$84 a barrel over2023, as OPEC+ reduce output while a rebound in global transportdemand drives higher oil usage. However, the price is expected to fall
to around US$79 a barrel by 2025, as modest market surpluses
emerge.
 Australia’s crude and condensate production volumes are expected tofall to around 290 kilobarrels per day by 2024-25, as production at theNorth-West Shelf declines.
 Australia’s crude and condensate export earnings are expected to lift to
A$14.6 billion in 2023–24 as export volumes rise, before falling to
A$11.9 billion in 2024–25 as prices fall and output declines at theNorth-West Shelf.

8.2

World consumption

China drives global demand recovery while Europe slows
Global oil consumption is estimated by the International Energy Agency(IEA) to have risen by 3.4% year-on-year in the June quarter 2023, as theshort run effects of recovery from the pandemic (particularly in China)
temporarily offsets a structural slowdown in demand.
Between the June quarter 2021 and the June quarter 2023, Chinesedemand rose by an annual average of 3.8%. Year on year, demand rose
17.9%, though this partly reflects pandemic restrictions in the June quarter2022. China’s post pandemic rebound has unleashed strong pent-up
demand for services, and the recovery in transport demand for oil has
been robust. China’s domestic air travel volumes have closed on prepandemic levels, but international air travel volumes remained much
weaker.
Despite broader weakness in Chinese manufacturing, industrial demandfor oil strengthened in the June quarter. Chinese petrochemical plants,
which use various refined oil products to make chemicals used to forplastics, ramped up production over the quarter. The magnitude ofincrease in demand suggests that expansion in Chinese petrochemical
Resources and Energy Quarterly September 2023

plant capacity had been masked by underutilisation over the pandemic
period.
Demand from OECD countries rose 1.1% year-on-year in the Junequarter. Rising interest rates does not appear to have triggered arecession, as predicted by many analysts, resulting in stronger than
expected oil demand.
Amongst OECD countries, air travel continued to recover from thepandemic. Jet fuel demand continued to grow strongly in the June quarter
2023, rising by 11.1% year-on-year, with increased demand across mostcountries. Offsetting this growth, demand for petrol and diesel fell by 1.2%
year-on-year, driven by the rapid adoption of electric vehicles (EVs).
Demand for naphtha, typically used as an industrial solvent and in plastic
production, fell 7.9% year-on-year, driven almost entirely by weakindustrial activity in Europe.
Jet fuel growth to slow while electric vehicles displace demand
Global oil consumption is forecast to rise by 2.3% to 101.7 million barrels
per day in 2023, exceeding the pre-pandemic levels recorded in 2019.
Consumption growth is expected to be underpinned by the ongoingrecovery of global air travel. World oil consumption growth is then
expected to slow to an average of 1.3% per year in 2024 and 2025, when
the demand recovery from the pandemic period is expected to taper off,
and a gradual replacement of internal combustion engine vehicles (ICEs)
with EVs will reduce oil demand. Growth in industrial use, particularly fromnew petrochemical plants in China, will support demand over the outlook
period.
EVs are rapidly gaining market share in the global passenger vehicle
market (see Lithium chapter) as prices fall, driven by improvements inbattery technologies, the US Inflation Reduction Act, and the increasing
export penetration of cheaper Chinese models. Material cost pressures onbatteries, which have slowed EV cost declines since 2021, will ease withlithium prices forecast to fall over the outlook period. The share of EVs
sold in the passenger vehicle market is forecast to exceed 20% by 2025,with strong adoption expected in China, Europe and the US. The shift in
88

Growing demand for jet fuel will support world oil consumption, with mostof the rebound likely to taper off by the end of 2023. The IEA estimates
global jet fuel consumption will rise by 17% in 2023, and slow to growth of
1.2% in 2024 (Figure 8.2). The International Air Transport Association
reported that, globally, kilometres travelled by paying passengers havecontinued to grow through the June quarter, with the month of Junereaching 94% of the volumes recorded in June 2019. While global air
travel volumes are closing on 2019 levels, jet fuel consumption remains
lower, due to improvements in aircraft fuel efficiency.
Growth in jet fuel consumption will likely settle at a rate slower than the
pre-pandemic trend. Growth in recreational air travel heavily depends on
rising incomes in middle income countries, so slower economic growth inChina has weakened the outlook for jet fuel. Policies targeting aviation
emissions in Europe will also likely reduce jet fuel demand, with the EUplanning to phase out free allocations of carbon permits for domestic
flights by 2026.
Unlike road transport, low-carbon alternatives are unlikely to substitutesubstantial volumes of petroleum jet fuel over the outlook period. Electricand hydrogen technologies are not viable for air travel (at least in theircurrent design), as the relatively low energy density of batteries, or a tankfor hydrogen, adds too much mass to a plane.

Resources and Energy Quarterly September 2023

1,600
1,400
1,200
MillionAs a result, the global ICE passenger vehicle fleet is forecast to plateau
over the next two years (Figure 8.1), having grown at an average annual
rate of 3.3% in the four years before the pandemic. Improved fuelefficiency among the ICE vehicle stock will also contribute to declining
demand, as retiring ICE vehicles tend to be less fuel efficient than newer
models. For OECD countries, consumption of petrol and diesel likely
peaked in 2019, with the IEA forecasting consumption in 2023 to be 4.3%
lower than in 2019, with a further 1.1% fall forecast for 2024.

Figure 8.1: Global passenger vehicle stocks

1,000
800
600
400
200
0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Internal Combustion Engine Hybrid Zero Emission Vehicle

Notes: Zero-emission vehicles includes battery electric vehicles (BEVs), plug-in hybrid
electric vehicles (PHEVs) and fuel cell electric vehicles (FCEVs), while EVs refers to only
BEVs and PHEVs.
Source: Wood Mackenzie (2023)

Figure 8.2: Global jet fuel consumption, OECD and non-OECD
9,000
8,000
Million barrels a day

the composition of the global vehicle fleet towards EVs will accelerate overtime as EVs gain market share in new car sales, resulting in an
accelerated fall in demand for petrol and diesel.

7,000
6,000
5,000
4,000
3,000
2,000
1,000
0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
OECD

Non-OECD

World

Source: International Energy Agency (2023), Department of Industry, Science and Resources(2023)

89

8.3

World production

Figure 8.3: OPEC spare crude oil capacity, as a percentage of total
25%

Cuts from OPEC+ drives fall in global supply
World oil production is estimated to have fallen by 0.1% quarter-on-quarterin the June quarter 2023. It is up 2.9% year-on-year, impacted by the
Russian invasion of Ukraine in the June quarter 2022. Cuts in output by
OPEC and Russia drove the fall, albeit with a partial offset from North
American producers, who raised their output.

Russian exports fall as pressure mounts over war in Ukraine
Russia announced 2 rounds of output cuts in March 2023 and in August2023 for 500 kilobarrels a day (kb/d) each. Russia further clarified in
September that the second round of output cut will be eased to only 300
kb/d from September, to last until the end of 2023. The cuts were enacted
as the withdrawal of Western companies, bans on technology exports andlabour shortages in Russian industry erodes the productivity of Russian oil
fields and delays new projects. A Ukrainian drone attacked a Russian oil
tanker in the Black Sea in August, presenting added logistical challenges
for Russian exports.
Russian oil trade has increasingly diverted away from OECD countries
since the invasion of Ukraine. The G7, EU and Australia all imposed pricecaps on Russian crude and refined products from 5 December 2022 and 5
February 2023, respectively, by preventing the sale of insurance for
Russian oil cargoes if they are sold at a price above the cap. Since theprice caps took effect, India, and to some extent China, have become the

15%
10%
5%
0%

Jun-19
Saudi Arabia

Jun-20
Iraq
Iran

Jun-21
UAE

Jun-22Jun-23
KuwaitOther OPEC

Notes: Spare capacity is the estimated capacity which can produce within 90 days.
Condensate excluded.
Source: Wood Mackenzie (2023), International Energy Agency (2023), Department ofIndustry, Science and Resources (2023)

Figure 8.4: Russian seaborne crude oil exports by destination
6,000
kilobarrels per day

Having kept output targets steady since November 2022, in early April
OPEC+ announced that targets would be cut by 1 million barrels a day. In
May, Saudi Arabia announced a further voluntary output cut of 1 million
barrels a day in July and have since extended the cut until the end of2023. Spare OPEC crude oil capacity is estimated at 15% for the Junequarter 2023 (Figure 8.3), and Saudi Arabia’s voluntary cuts will see
OPEC spare capacity rise further over the September 2023 quarter. Withbrent oil price rising above the high-70s seen over the June quarter,
further OPEC cuts in 2023 appear unlikely.

20%

5,000
4,000
3,000
2,000
1,000
0

Jun-19Jun-20China
Other Non-OECD
Other OECD
Unknown

Jun-21

Jun-22Jun-23
India
OECD Europe (ex Turkey)
TurkeyNotes: Export volumes are estimated using vessel tracking data and may deviate from
customs data.
Source: Kpler (2023)

Resources and Energy Quarterly September 2023

90

largest destination for Russian crude exports (Figure 8.4). Russia’s refinedexports were diverted to the Middle East, Africa, Turkey and other nations.

8.4

Russian oil exports are now largely carried by a fleet of older tankers
operating outside of the Western shipping system to circumvent theinsurance bans and price caps. Where this fleet of ships is not able toprovide sufficient capacity to carry Russian products, European vessels
subject to the price cap have been engaged as needed.

Crude oil prices slid over 2022. After peaking early in the year with
Russia’s invasion of Ukraine, prices fell as pandemic restrictions in China
and high energy prices globally drove sharp falls in oil demand. Prices
continue to slide in the first half of 2023. China’s reopening has proved tobe slower than expected as its economy struggles with a weak housing
market and consumer demand, while global economic growth slows andinterest rates rise. The pace of price falls slowed in the June quarter of2023 when prices reached US$78 a barrel (Figure 8.5), amidst a series of
production cutbacks by various OPEC+ countries.

US and Latin America to drive supply growth
World oil output is forecast to grow by 1.6% in 2023. Higher shale oil
production in the US should drive much of this output growth. US Energy
Information Administration forecasts that US crude output could grow by
about 3% per year over 2023 and 2024 — a rise of about 300 kb/d per
year. This growth is much lower than in the peak years of the shale oilrevolution, when US crude oil output grew by about 800 kb/d per year
(2012-2019), with investors remaining cautious about potential investment
in new oil capacity.
Latin American nations are expected to add to global supply over theoutlook period. The IEA is expecting Brazil to add about 240 kb/d to global
crude supply in 2024, with Brazil’s state-owned oil company Petrobras
expected to deploy four new offshore platforms over the next 18 months.
New supply is also expected from Guyana. After a series of discoveries
from 2008, offshore production in Guyana began in 2019, and output
reached 370 kb/d in 2022. Projects currently in the pipeline could morethan double production capacity in Guyana by 2025.
Resources and Energy Quarterly September 2023

Oil market to tighten as OPEC+ cuts back supply and demand recovers

Figure 8.5: Price outlook
120
100
US$ a barrel

Russian crude has traded at deep discounts due to the price caps on
Russian oil exports, with some portion of Russian crude being sold above
the price caps outside Western nations. However, discounts on Russiancrude appear to be narrowing. The IEA estimated that the Russian crude
export price was about US$57 a barrel in the June quarter, rising from
US$52 in the March quarter, while the Brent crude price has fallen overthe same period. Minister for Petroleum and Natural Gas Hardeep Puri
said on 30 August that Indian demand for Russian crude can be expected
to “decrease sharply” in coming months as the discount narrow further.

Prices

80
60
40
20
0
Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar-25 Mar-26
Brent

West-Texas Intermediate

Source: Bloomberg (2023); Department of Industry, Science and Resources (2023)

Prices rallied from June 2023 and are expected to average US$85 a barrel
in the September quarter. Production cutbacks from OEPC+ countries
have seen supply tighten, while a sharp increase in Chinese industrial
consumption and the normalisation in global air passenger volumes drove
increases in demand.
91

OECD industry oil stocks rose in the June quarter 2023 (Figure 8.6) after
falling in the March quarter 2023. The increase is unlikely to be sustained
as the market tightens over 2H 2023. The US government had delayedplans to restock the Strategic Petroleum Reserve (SPR). Of the 9 million
barrels of crude oil which were scheduled for delivery to the SPR between
August and November, 6 million barrels had been cancelled.
Figure 8.6: Change in OECD Petroleum Stocks

Australia

Export earnings to fall as prices decline
Australian crude oil and condensate export earnings fell 27% year-on-year
to $33 billion in the June quarter 2023, primarily driven by lower prices.
The top destinations for Australian exports over the quarter wereSingapore, Thailand, and South Korea (Figure 8.7).
Export earnings fell by 4.9% to $13.3 billion in 2022–23 (Figure 8.8) as
prices declined from the very high levels seen in the wake of the Russian
invasion of Ukraine. Output in H1 2023 was below expectations, impacted
by disruptions such as a strike at the Prelude LNG facility. Export earnings
are expected to lift to $14.6 billion in 2023–24, with prices rising as global
oil markets tighten. Exports are forecast to fall to $11.9 billion in 2024–25.

280
240
200
160
120

Figure 8.7: Quarterly Australian crude oil and condensate export
value, by destination

80
40
0

1,000

-40

900

-80

800

-120

700

-160

Jun-18Jun-19Jun-20Government

Jun-21
IndustryJun-22Jun-23

Source: International Energy Agency (2023)

The Brent crude price is forecast to average US$84 a barrel over 2023,
with prices rising marginally over the final quarter of the year, as themarket continues to tighten.
The Brent crude is then projected to decline to US$79 a barrel by 2025.
The fall is expected to be driven by rising production outside of OPEC,
particularly in North America and Latin America, combined with slowing
demand growth — as the world gradually transitions to low emission
technologies.

Resources and Energy Quarterly September 2023

A$ million

q/q change (million barrals)

8.5

600
500
400
300
200
100
0

Singapore S. Korea

China
Mar-23Thailand Malaysia

Other

Jun-23

Source: Australian Bureau of Statistics (2023)

92Delays over investment decision casts uncertainty over outlook

Australian refineries to remain open with government support

In the June quarter 2023, Australian crude oil and condensate output fell
10% year-on-year to 301 kb/d. The fall is due to lower production in the
Carnarvon basin, which is moving towards end of life. This includes fields
such as the North-West Shelf and Greater Enfield. Production is expected
to fall further over the outlook period to 290 kb/d in 2024–25, as the fields
in the Carnarvon basin continue to move towards end of life.

In 2021, falling demand linked to COVID restrictions resulted in the closureof two of Australia’s refineries. The remaining two refineries signed
contracts with the Federal Government to remain open until at least 2027,
in exchange for a subsidy on each litre of refined product sold. Australia’s
two remaining refineries are expected to have their operational life
extended, with plans to extend the Lytton plant announced in April 2022
and plans to extend the Geelong plant announced in January 2023.
Australian refined production is expected to remain at around 250 kb/dover the outlook period. Australia’s consumption of refined oil productsrose by 6.6% year-on-year in the June quarter 2023, driven by a 30%
year-on-year increase in jet fuel sales. This reflected the opening ofAustralia’s international borders in November 2021. Demand for roadtransport also saw a continuing recovery, with sales of automotive
gasoline rising 1.9% year-on-year, and sales of diesel rising
5.4% year-on-year.

A final investment decision for the Dorado oil and gas field was expectedin the second half of 2022, but the decision has been delayed to 2024,with Carnarvon Energy divesting a 10% stake in the project to Taiwan’s
CPC Corporation in February 2023. If the project proceeds, it could bringaround 90 kb/d of additional production capacity online.

320

16

240

12

160

8

80

0

4

2016–17

2018–192020–21
Volumes2022–23

2024–250Exploration

A$ billion

kilobarrels per day

Figure 8.8: Australian crude oil and condensate exports

Australia’s petroleum exploration expenditure was $230 million in the Junequarter 2023, down 6.2% year-on-year (see Figure 7.16 in the Gas
chapter). Offshore exploration fell 21% year-on-year to $84 million, while
onshore exploration spending rose by 5.3% year-on-year to $145 million.
Revisions to forecasts
Since the June 2023 Resources and Energy Quarterly, the forecast forAustralia’s crude and condensate export earnings has been revised up
6.1% (to $14.6 billion) in 2023–24 and up 1.3% (to $11.9 billion) in
2024–25. The revisions are due to a combination of a lower AUD/USD
exchange rate forecast, higher prices, and higher export volumes.

Values

Source: Australian Bureau of Statistics (2023); Department of Industry, Science andResources (2023).

Resources and Energy Quarterly September 2023

93

Table 8.1: Oil Outlook
Percentage changes

World

Unit

2022

2023 s

2024f

2025f

2023f

2024f

2025f

Productiona

mb/d

100

102

103

105

1.6

1.2

1.7

Consumptiona

mb/d

100

102

103

104

2.3

1.0

1.6

– nominal

US$/bbl

95

79

82

75

-16.9

3.8

-7.9

– real

US$/

99

79

79

72

-20.4

0.9

-9.8

– nominal

US$/bbl

100

84

86

79

-16.2

3.1

-8.2

– real

US$/bbl

104

84

84

76

-19.8

0.3

-10.1

Australia

Unit

2021–222022–23 s

2023–24f

2024–25 f

2022–23

2023–24f

2024–25 f

WTI crude oil priceb

Brent crude oil priceb

Crude and condensate
Productionac

kb/d

336

298

310

290

-11.5

1.8

-6.4

a

Export volume

kb/d

290

280

295

274

-3.6

5.6

-7.2

– Nominal value

A$m

14,031

13,26914,58011,900

-5.4

9.9

-18.4

– Real value

A$m

15,63013,811

14,58011,524

-11.6

5.6

-21.0

Importsa

kb/d

180

169

188

187

-5.9

11.2

-0.9

LPG productionacd

kb/d

107

93

107

103

-13.5

15.1

-3.5

– Refinery productiona

kb/d

266

252

251

249

-5.3

-0.4

-0.9

ae

– Export volume

kb/d

8

6

5

4

-32.5

-17.1

-13.5

– Import volumea

kb/d

743

858

863

869

15.5

0.6

0.7

– Consumptionag

kb/d

934

1,021

1,023

1,027

9.3

0.2

0.4

h

Refined products

Notes: a The number of days in a year is assumed to be 365, and a barrel of oil equals 158.987 litres; b In 2023 calendar year US dollars; c Historical production data was revised in the December
quarter 2021 to align with the Australian Petroleum Statistics; d Primary products sold as LPG; e Excludes LPG; f Forecast; g Domestic sales of marketable products, including imports; h In 2023-24
financial year Australian dollars; r Compound annual growth rate (per cent), for the period from 2022 to 2028 or for the equivalent financial years. s estimate.
Source: ABS (2023) International Trade in Goods and Services, Australia, Cat. No. 5368.0; International Energy Agency (2023); US Energy Information Administration (2023); Department ofIndustry, Science, Energy and Resources (2023); Department of Climate Change, Energy and Environment (2023).
Resources and Energy Quarterly September 2023

94

95

9.1






9.2

Summary
Uranium prices are forecast to increase from US$50 a pound in 2022 toaround US$64 a pound by 2025. Rising prices reflect sustained low
investment in new mines and potential emerging shortfalls in uranium
supply.

Figure 9.1: Growth in world nuclear power generation0

1967

Price and volume growth are expected to drive uranium export values
up from around $800 million in 2022–23 to $950 million by 2024–25.

1977

Utility purchases are slowly pushing prices up
Global demand for uranium is rising as nuclear deployments continue totrend up (Figure 9.1) and as utilities seek to build stocks ahead of apotential supply shortfall in the mid-2020s. Uranium consumption is set tobe supported by growing demand in China and other parts of Asia, North
America and Eastern Europe (Figure 9.2).
Investment in nuclear power is rising in North America after a long period
of disinterest. In the US, Georgia Power’s Vogtle plant has completed
construction of its new reactors and is now providing power to the grid.
The new reactors are the first to be constructed in the US since the early
1990s. In Canada, the Ontario Government has announced predevelopment on an additional 4800MWe of new capacity at the Bruce site.
Canada has not engaged in a large expansion of nuclear power since the1990s, but proponents of the project have raised the possibility of scaling
up further over time.
Japan has connected two further reactors to the grid, with units 1 and 2 of
the Takahama nuclear power plant restarting in July and September, after
12 years offline. A total of 12 reactors have now reconnected, with thepace of connections rising as local and national governments respond tohigh gas and coal prices and attempt to meet targets for lower emissions.
Resources and Energy Quarterly September 2023

Electrical capacity added (gigawatts)
10
15
20
25
30

US

EU countries

35

40

1962

Australian exports are forecast to increase from around 5,400 tonnes in2022–23 to around 6,000 tonnes by 2024–25 (see Australia section).
The opening of Boss Energy’s Honeymoon mine in South Australia is
expected to increase output from 2024.

World consumption

5

1972

1982
1987
1992
1997
2002
2007
2012
2017
2022
Japan

China

Others

Source: International Energy Agency (2023); World Nuclear Association (2023); Department
of Industry, Science and Resources (2023)

96

Türkiye has announced a goal to add 20GW of nuclear power to its grid
over the next 30 years. Talks are now underway with South Korea, Russia
and China to develop a second and third reactor following the successful
construction of its first. Türkiye is also engaged in talks with the UK andUS over potential development of small modular reactors.

9.3

World production

Production is building, but may reach capacity limits in the 2020s
Higher prices have seen several large companies — including
Kazatomprom and Cameco — revise up their sales guidance in recent
months. This is feeding into a general rising production outlook as
suppliers seek to keep pace with global demand (Figures 9.2 and 9.3).
Supply shortfalls remain a risk due to a long period of low investment in
new supply, which coincided with a long run of low prices after 2011. New
mines in Africa and Asia are likely to be needed to keep demand andsupply matched over the longer term.
Supply from Niger (currently around 5,000 tonnes per year) faces potential
disruptions following the coup d'état in July 2023. At this stage, no impact
has been reported at existing mines, but the Global Atomic Corporation
has announced that its proposed Dasa mine may be delayed for 12months. The newly installed junta has also threatened to suspend exportsof uranium to France. Niger is the world’s seventh largest uranium
supplier, but resource extraction in the country has regularly faced
opposition and protest action.
Resources and Energy Quarterly September 2023

100
80
Thousand tonnes

Poland’s plans to build its first nuclear plant recently passed a hurdle, withthe country’s Ministry of Climate and Environment providing in-principle
approval for a project submitted by Poland’s state-owned nuclear plantdeveloper. The approval indicates that the project is considered to be in
the public interest and in line with the Government’s current energy policy.

Figure 9.2: World uranium consumption and inventories (U3O8)

60
40
20
0

2013
2015
2017
2019
2021
China
European Union Japan
United States
OthersInventories

2023
2025
RussiaTotal production

Source: International Energy Agency (2023); World Nuclear Association (2023); Ux
Consulting (2023)

Figure 9.3: World uranium output (U3O8)
100

Thousand tonnes

China’s State Council has approved construction for 6 more nuclear
plants. Construction is imminent for units 1 and 2 of the Shidaowan plantin Shandong Province, units 5 and 6 of the Ningde plant in Fujian Province
and units 1 and 2 of the Xudabao plant in Liaoning Province.

80
60
40
20
0

2013

2015

Kazakhstan
AfricaSecondary supply

2017

2019

2021

CanadaRussiaTotal consumption

2023

2025

Australia
Others

Source: International Energy Agency (2023); World Nuclear Association (2023); Ux
Consulting (2023)

97PricesFigure 9.4: Uranium price outlook

Prices are expected to rise steadily, with upward pressures growing120
US$ a pound

Exploration and development of new uranium deposits is on the rise
globally as stronger prices draw capital towards the sector. This
investment is not expected to bring significant new production online
during the outlook period. As such prices will likely keep rising as demand
grows relative to output. In the short term, sufficient supply capacity exists
to hold prices in relative check, but price growth could accelerate from thelate 2020s if new supply fails to emerge.

140

Prices are expected to lift to above US$60 a pound by 2025, with risks
weighted to the upside (Figure 9.4).

80
60
40
20
0
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

Australia

Higher export earnings are expected following the opening of a new mine
Australian output is currently generated from two mines, with two
additional mines in development. Boss Energy’s Honeymoon mine is
expected to re-open by the end of 2023. The mine has been in care andmaintenance since 2013, but is expected to produce around 1,100–1,200
tonnes of uranium per year for at least ten years. Boss Energy recently
announced the completion of its first wellfield at the site. Other
constructions — including the water treatment plants and gypsum pond —are also close to completion. Following its recent progress, the company
noted, ‘(t)he project development is proceeding to plan and remains ontime and on budget’.
Higher prices and production are expected to see export earnings surpass$950 million by 2024–25 (Figure 9.5, Table 1). Prices are also motivating
renewed exploration, with exploration spending doubling over the past
year, to reach $13 million in the June quarter 2023.
Revisions to the outlook
Export earnings forecasts for 2023–24 and 2024–25 have been revised up
by $90 million and $35 million (respectively) since the June Resources andEnergy Quarterly. This reflects a recent strengthening in the price outlook.

Resources and Energy Quarterly September 2023

Spot prices

Contract prices

Source: Cameco Corporation (2023) Uranium Spot Price; Ux Consulting (2023) Uranium
Market Outlook

Figure 9.5: Australia's uranium exports

Thousand tonnes

9.5

100

9

1800

6

1200

3

600

0
2012–13

2016–17
Export volumes

2020–21

A$ million

9.4

02024–25

Export values (rhs)

Source: Department of Industry, Science and Resources (2023)

98

Table 9.1: Uranium outlook
Annual percentage change
World

Unit

2022

2023 f

2024 f

2025 f

2023 f

2024 f

2025 fProduction

kt

58.8

63.5

69.7

70.8

8.0

9.8

1.7

Africab

kt

9.6

9.6

10.1

10.1

0.0

4.7

0.3

Canada

kt

9.1

11.3

12.9

12.9

25.0

14.0

0.0

Kazakhstan

kt

25.4

26.9

29.8

29.7

6.0

10.7

-0.2

Russia

kt

3.1

3.5

3.7

3.9

10.7

7.8

3.6

Consumption

kt

76.3

78.7

82.9

82.7

3.2

5.2

-0.2

China

kt

11.3

13.6

13.3

14.4

20.5

-1.9

8.2

European Union 27

kt

17.8

19.8

19.6

18.9

11.0

-1.1

-3.3

Japan

kt

1.6

1.9

2.9

2.9

18.2

51.4

0.0

Russia

kt

7.9

6.5

7.0

6.7

-17.2

6.3

-3.4

United States

kt

20.7

19.7

21.5

21.3

-4.9

8.8

-0.9

Spot price

US$/lb

49.8

56.2

62.5

64.2

12.8

11.2

2.7

– realc

US$/lb

52.0

56.2

60.8

61.2

8.0

8.2

0.6

Australia

Unit

2021–222022–23

2023–24 f

2024–25 f

2022–23

2023–24 f

2024–25 f

Mine production

t

4,485

5,454

5,855

6,060

21.6

7.4

3.5

Export volume

t

4,933

5,485

5,855

6,060

11.2

6.7

3.5

– nominal value

A$m

564

812

962

955

43.8

18.6

-0.7

– real valued

A$m

628

845

962

925

34.4

13.9

-3.9

Average price

A$/kg

114.4

147.9

164.4

157.6

29.4

11.1

-4.1

– real

A$/kg

127.4

154.0

164.4

152.7

20.9

6.8

-7.1

d

Notes: b Includes Niger, Namibia, South Africa, Malawi and Zambia; c In 2023 US dollars; d in 2023–24 Australian dollars; s estimate; f forecast; r Annual growth rate
Source: Department of Industry, Science and Resources (2023); Cameco Corporation (2023); Ux Consulting (2023) Uranium Market Outlook

Resources and Energy Quarterly September 2023

99

100

101

10.1






Summary

Gold prices averaged US$1,933 an ounce in the first half of 2023, withsupport coming from strong safe-haven buying and a slightly weaker US
dollar. Over the outlook period, prices are forecast to remain elevatedbut decline gradually to average around US$1,830 an ounce in 2025.
Australian gold production decreased to 149 tonnes in the first half of2023, due to disruption from heavy rainfall. Production is forecast to
increase with new projects and expansions (see Australia section).
Gold earnings are forecast to decrease from $24 billion in 2022–23 toaround $22 billion in 2024–25, as lower prices outweigh higher volumes.

10.2

World consumption

World gold consumption decreased in the March quarter 2023
World gold demand decreased by 5.6% year-on-year to 2,060 tonnes in
the first half of 2023. This was driven by a 31% decline year-on-year ininvestment demand, partly offset by strong central bank net purchases.
Official sector buying (central banks and other government financial
institutions) increased by 61% year-on-year to 387 tonnes in the first halfof 2023. Growth was driven by record demand during the March quarter,with net purchases easing to be 35% down year-on-year in the Junequarter. According to World Gold Council data for declared purchases,
much of the buying was dominated by China (103 tonnes). Singapore(73 tonnes) was the second largest buyer and Poland (48 tonnes) the thirdlargest. Having been a major buyer from December 2021 to February
2023, Türkiye reported 102 tonnes of net sales over the first half of 2023
— a result of strong domestic demand and a temporary ban on gold
imports. Notable sales also came from Kazakhstan (38 tonnes),
Uzbekistan (19 tonnes) and Cambodia (10 tonnes).
Gold purchases by non-government buyers in the first half of 2023
declined year-on-year, with strong gold demand from consumers(jewellery, gold coins and bars) more than offset by outflows from goldbacked exchange-traded funds (ETFs).

Resources and Energy Quarterly September 2023

ETF outflows reached 50 tonnes over the first half of 2023, compared to
223 tonnes of inflows a year earlier. Demand declined towards the end of
the June quarter, with strong outflows in June — coinciding with pricedeclines and rising equity markets — ending 3 months of inflows.
Retail investment in gold bars and coins rose year-on-year in the first halfof 2023, with investors buying 582 tonnes. Demand was supported bystrong domestic gold prices in China during its seasonal peak in the March
quarter and by a near-record tendency for households to save. Bar andcoin demand increased almost five-fold in Türkiye — where negative realinterest rates, a weak lira and safe-haven demand motivated gold buying.
Global jewellery demand rose marginally year-on-year in H1 2023, driven
by a strong resurgence in Chinese consumption, offsetting weaker Indian
consumption. Consumption was resilient given record gold prices recorded
in China and India during the June quarter 2023.
Jewellery demand in China rose by 19% year-on-year to 347 tonnes in H1
2023. Growth was particularly strong year-on-year as the first half of 2022base was affected by COVID-related mobility restrictions. Pent-up wedding
demand and economic uncertainty supported jewellery demand, with gold,
silver and jewellery the strongest growth category of Chinese retail sales
over the first half of the year — increasing by 18% year-on-year.
Jewellery consumption in India — along with many other markets —declined year-on-year in the first half of 2023, due to high domestic prices.
Weak demand for consumer electronics over the first half of the year alsotranslated to weak demand for gold in electronics — such as in lightemitting diodes (LEDs) and printed circuit boards. This brought technology
demand for gold down by 10% year-on-year to 140 tonnes: the weakest
recorded in the World Gold Council’s historical data.
Lower official sector demand to push gold consumption down in 2023
After a very strong 2022, world gold consumption in 2023 is forecast to
decrease by 9.5% to about 4,300 tonnes. The decline is expected to bemainly driven by lower official sector buying — which will neverthelessremain high in historical terms, at around 750 tonnes (Figure 10.1).
102Investment demand (gold-backed ETFs or bar and coin holdings) is
expected to decline marginally in 2023 but remain supported by ongoinggeopolitical and economic uncertainty.
Jewellery consumption in 2023 is forecast to be slightly below 2022 levels,with strong growth in China offset by high local gold prices constraining
demand in other key markets. Consumption growth is expected to remain
subdued in key markets such as India and the Middle East, due to the
combined effects of high US dollar gold prices and weak local currencies(against the US dollar).
Gold consumption to grow over the medium-term
World gold consumption is forecast to rise gradually after 2023, to reachabout 4,400 tonnes by 2025. Demand growth is expected to be largely
driven by increasing jewellery consumption, with investment demand andtechnological usage contributing to a lesser extent (Figure 10.1).

Figure 10.1: World gold demand by sector

Investment demand is forecast to remain relatively steady over theforecast period, at around 1,100 tonnes. As inflation eases towards central
bank targets, interest rates are assumed to decline over the medium-term.
If interest rates are cut faster than inflation declines over the medium-term,
this will support institutional investment and retail demand through lower
real interest rates.
Physical (bar and coin) demand is expected to remain strong, as lower
forecast prices and economic uncertainty support buying activity nearrecent elevated volumes.

2,000

Official sector demand is projected to moderate to around 550 tonnes a
year by 2025. Buying activity is expected to be strongly driven by
emerging market central banks, which will continue long-term
diversification of their reserves with gold. According to World Gold Council
data for declared gold purchases, Russia added 31 tonnes to official
reserves in 2022. Given ongoing sanctions on foreign exchange andrestricted access to its foreign reserves, it is likely that Russian official
sector demand will be strong over the outlook period.

1,000

10.3

5,000
4,000

tonnesJewellery consumption is forecast to grow strongly from 2024 onwards, toreach 2,400 tonnes by 2025. Consumption will be supported by
improvements in consumer sentiment and rising incomes, particularly inthe key markets of China and India. Lower gold prices and a weaker US
dollar are expected to drive particularly strong growth in jewellery demandin 2024, with an increase of 11% year-on-year.

3,000

World production

World supply increased in the first half of 2023
02017 2018 2019 2020 2021 2022 2023
Jewellery fabrication
Investment
Central banks & other institutions Technology

2024

2025

Notes: Jewellery fabrication includes jewellery consumption and the change in jewellery
inventory. Investment includes ETFs, bars and coins. Technology includes gold used in theelectronic, dentistry and other industrial sectors.
Source: World Gold Council (2023); Metals Focus (2023); Department of Industry, Scienceand Resources (2023)

Resources and Energy Quarterly September 2023

World gold supply increased by 5.3% year-on-year to 2,460 tonnes in thefirst half of 2023, driven by both higher mine production and recycling.
Global mine production rose by 3.1% year-on-year to a record
1,780 tonnes in the first half of 2023. Growth was led by increased
production from the major producers, a ramp-up of new operations in
Brazil and Mongolia, and a return to normal operations in South Africa.

103

In Australia — the third-largest gold producing country — output
decreased by 3.7% year-on-year in the first half of 2023, to 147 tonnes.
Australian mine production decreased due to disruptions from heavy
rainfall over the quarter and several mine closures (see Australia section).
Production from Ghana — the sixth-largest gold producing country —increased by 20% year-on-year in the June quarter 2023, due to theramping up of production at the Bibiani and Obuasi mines.

Figure 10.2: World gold supply
5,000
4,000

Tonnes

Production in China — the world’s largest gold producing country — roseby 2.2% year-on-year to 179 tonnes in the first half of 2023, with year-onyear improvement the result of fewer weather- and COVID-related
disruptions.

3,000
2,000
1,000

Gold recycling in H1 2023 rose to 634 tonnes — the highest first half inseven years — in response to stronger gold prices. Recycling growth wasstrong in China (supported partly by June quarter 2022 base effects) andIndia (a highly price-sensitive market).

Note: Net producer hedging is not included.

World supply to stabilise as mine supply growth slows

Source: Department of Industry, Science and Resources (2023); Metals Focus (2023); WorldGold Council (2023).

Global gold supply is forecast to stabilise at around 4,800 tonnes in the
period to 2025, with increasing world gold mine production offset bydecreasing recycling activity (Figure 10.2).
World gold mine production is forecast to rise by 1.2% a year on averageby 2025 to 3,760 tonnes, led by increases in Canada, Chile and Brazil.
Canadian mine output is forecast to rise by 24% from 2023 to 2025, toreach 249 tonnes. Canadian production increases will be particularly large,
with the 11 tonnes per year Côté project and the 10 tonnes per year
Blackwater project commencing operations in the next two years.
Continued environmental regulations and industry consolidation in China is
expected to see production fall over the medium-term.
Partially offsetting increases in mine production, gold recycling activity is
forecast to decline on average by 5.4% a year by 2025, due to lower
forecast gold prices.

Resources and Energy Quarterly September 2023

0

10.4

2017

2018

2019 2020 2021 2022
Mine production
Scrap

2023

2024

2025

PricesGold prices rose strongly in the first half of 2023
The London Bullion Market Association (LBMA) gold price rose as high as
US$2,050 an ounce in May 2023, with prices in the first half of the year
averaging US$1933 an ounce — 3.2% higher than in 2022.
Gold prices remained elevated through July 2023 due largely to US dollar
depreciation and continuing safe-haven demand. The US dollar declined
over July following lower-than-expected inflation data and expectations forhigher interest rates in other major currency hubs such as the United
Kingdom and Europe. Gold prices then fell consistently throughout August,under pressure from a strengthening US dollar and rising real bond yields(Figure 10.3).
Rising bond yields tend to decrease gold’s appeal to institutional and retailinvestors as a secure asset to hedge against inflation or other risks. This isbecause increases in the yield of a US Treasury (or other credible104

government bonds) increase the so-called market “risk-free rate”, andhence the opportunity cost of holding gold (pushing prices down).
However, the relationship between real bond yields and gold prices
weakened sharply following the Russian invasion of Ukraine — as prices
were lifted by heightened safe-haven demand for gold. This has persisted
as a driver since, muting the effect of interest rates.
Expectations the US Federal Reserve would hold interest rates higher for
longer than previously indicated, due to persistent core inflation or future
inflationary spikes, strengthened through August. The US inflation-indexed(“real”) Treasury bond yield rose to a 17-year high of 2.0%. The rise in real
yields pushed 10-year Treasury yields to a 16-year high above 4.3% andshorter-dated yields rose as high as 5% over 2 years. Yet, gold prices only
fell by US$80 an ounce over the month of August, demonstrating thestrength of safe-haven demand supporting gold.

2100

-1.5

1900

-1.0

1700

-0.5

1500

0.0

1300

0.5

1100

1.0

900

1.5

700

2.0

500

2.5

300

3.0

100
Sep-07

Sep-11

US$ gold priceSep-15

Sep-19%

US$ a troy ounce

Figure 10.3: Gold price and real US 10-Year Treasury yield

3.5
Sep-23

Real US 10 Year Treasury bond yield (inverted, rhs)

Source: Bloomberg (2023)

Resources and Energy Quarterly September 2023

Another factor could be surging commodity prices. Gold is seen as an
inflation hedge. This dates back to the 1970s and 1980s when surging oil
prices pushed up inflation. The rise in the gold price at that time, as lastyear, could have been driven by the recycling of petrodollars rather thanhigher inflation: high oil revenues and official sector purchases by major oil
producers were a feature of 2022 as well as the mid-1970s and early
1980s.
Gold prices to remain elevated after reaching a new high in 2023
Gold prices are forecast to average about US$1,930 an ounce in 2023 —an upward revision compared with the June 2023 Resources and Energy
Quarterly.
The price forecast for rest of 2023 is centred around a scenario where US
economic activity slows (but does not go into recession) and unacceptably
high core inflation persists, in line with our expectations in the June 2023
Resources and Energy Quarterly. In this scenario, real US interest rates
will remain high in line with current market expectations, ordinarily leading
to further declines in gold prices. However, price forecasts have beenrevised up over the short-term, in recognition of ongoing strength fromsafe-haven and central bank demand. Gold prices have held up
remarkably well despite downward pressure from various sources, such as
high real yields, a strong US dollar and lower ETF holdings.
If US economic activity declines substantially and interest rate cuts — notcurrently expected by markets — come to fruition in the first half of 2024,
this could create a more supportive environment for gold and see astronger price outcome than forecast. This would possibly come throughlower real interest rates, a weaker US dollar and demand for gold ETFs —as equity markets likely soften.
After 2023, gold prices are forecast to fall by 2.5% a year to an average ofaround US$1,830 an ounce in 2025, due to pressure from high realinterest rates (as global inflation eases) and a gradual easing of safehaven demand.

105

Australian gold export earnings to decline over the medium-term

Figure 10.4: US and Australian dollar gold prices

Australian gold export earnings are forecast to decline over the next two
years — to just above $24 billion in 2023–24 and $22 billion in 2024–25 —as increasing export volumes are more than offset by the impact of lower
Australian dollar prices (Figure 10.5).

2,500

2,500

2,000

2,000

1,500

1,500

1,000

1,000

500

500

0
0
2017 2018 2019 2020 2021 2022 2023 2024 2025
US dollar gold price
Australian dollar gold price (rhs)
Source: Department of Industry, Science and Resources (2023); LBMA (2023) Gold price PM

10.5

Australia’s trade, production and exploration

Australian gold exports rose in the first half of 2023
Australia’s gold exports increased by 7.6% year-on-year to $13 billion in
the first half of 2023. The increase was driven by higher Australian dollar
gold prices, which offset a 6.8% decline in export volumes. Export volumes
fell in line with lower mine output.
Australia exported $4.1 billion worth of gold to China in the first half of2023, up by 28% year-on-year. Australian exports to the financial hubs
(US, UK, Switzerland, Hong Kong and Singapore) were collectively worth$6.6 billion in the first half of the year — a 6.2% increase year-on-year.
Within the financial hubs, exports to the United Kingdom increased to$1.2 billion (from zero in H1 2022) and exports to Singapore increased by
51% to $1.7 billion.
Resources and Energy Quarterly September 2023

Figure 10.5: Australian gold exports and mine production
420

30

350

25

280

20

210

15

140

10

70

5

0

2014–15 2016–17 2018–19 2020–21
Mine production
Export volume2022–23 2024–25
Export value (rhs)

A$ billion

3,000

tonnes3,000

Australian gold export earnings are estimated to have increased by 5.2%
year-on-year to $24 billion in 2022–23, as lower export volumes wereoffset by stronger Australian dollar gold prices.

A$ a troy ounce

US$ a troy ounce

In combination with a forecast appreciation in the Australian dollar, thelower US dollar gold price is expected to lower Australian dollar prices
from A$2,900 an ounce in 2023 to A$2,500 an ounce in 2025
(Figure 10.4).

0Sources: ABS (2023); Department of Industry, Science and Resources (2023).

Australian gold mine production decreased in the first half of 2023
Australia’s gold industry produced 149 tonnes of mined gold in the first halfof 2023, down by 2.6% year-on-year. Production was adversely affectedby heavy rainfall in the Northern Territory (NT), as well as northern parts ofQueensland (QLD) and Western Australia (WA).
Production at Newmont’s 15 tonnes per year Tanami project in the NT
decreased by 18% year-on-year to 5.9 tonnes in the first half of 2023.
Production decreases largely occurred in the March quarter, where record
rainfall and associated flooding caused the closure of the main accessroute and the suspension of milling operations.
106

Production at Newcrest’s 20 tonnes per year Cadia mine in NSW fell by
15% year-on-year to 8.9 tonnes in H1 2023. Lower production was driven
by lower grades in both quarters and lower mill throughput — following anunscheduled mechanical breakdown at the Blayney dewatering facility
during the March quarter. Cadia delivered first ore from its new panel caveproject PC2-3 during the March quarter, with project ramp up progressing
as planned through the June quarter. First renewable power from the Rye
Park Wind Farm was achieved in July and early supply has commenced to
Cadia under its Power Purchase Agreement.

Newcrest and Greatland Gold’s 5.0 tonnes per year Havieron project is
expected to come online in 2024, with an updated feasibility study
forthcoming.
Northern Star Resources’ Super Pit (KCGM) gold operation is scheduled
to begin long-term expansion in 2024, growing to 675,000 ounces by2027–28. Northern Star recently committed to a $1.5 billion mill expansion
at KCGM to double processing capacity by 2029. This expansion will
increase the Super Pit’s production to 28 tonnes in 2028–29, comparedwith 13 tonnes in 2022–23.
Weaker than expected gold prices present a downside risk to the forecastsof Australian gold output (see Prices section). Much weaker prices could
see high-cost Australian producers cease or cut back their operations.
Gold exploration expenditure declined in the first half of 2023
Australia’s gold exploration expenditure decreased by 25% year-on-year to$591 million in the first half of 2023 (Figure 10.6).

Figure 10.6: Australian gold exploration expenditure and prices

Australian gold mine production to increase over the next two years
Australian gold production is forecast to rise from 302 tonnes in 2022–23
to 312 tonnes in 2024–25, as significant new projects and mine
expansions come online.
Production will continue to ramp up for recently commenced projects, such
as Red 5’s King of the Hills project, Pantoro’s Norseman project, andCalidus’ Warrawoona Gold Project.
Bellevue Gold’s 5.7 tonnes per year Bellevue gold mine in WA produced
first gold from toll treatment in August, with production and processing
onsite expected to come online over the second half of 2023.
Resources and Energy Quarterly September 2023

A$ million

BHP’s 4.5 tonnes per year Olympic Dam project has continued to deliverrecord gold production, following the implementation of initiatives toremove bottlnecks in 2022. Production in H1 2023 increased by 72% yearon-year to 3.0 tonnes.

450

3000

375

2500

300

2000

225

1500

150

1000

75

500

0
2009

2011
2013
2015
2017
Exploration expenditure

A$ a troy ounce

Production at Evolution’s 2.5 tonnes per year Ernest Henry projectdecreased by 43% year-on-year to 0.7 tonnes in the first half of 2023.
Operations were suspended at the mine in March following heavy rainfall
and floods across the northwest minerals province of Queensland.
Operations resumed in mid-April and returned to normal levels by the endof the June quarter 2023. Compensating for this, production at Evolution’s
Cowal operation increased by 29% to 4.6 tonnes in the first half of 2023,
as ore production ramped up from Stage H in the open pit, and productioncommenced from its new underground mine.

0
2019
2021
2023
Australian gold price (rhs)

Source: ABS (2023)

107

As a result, gold’s share of Australian mineral exploration expenditure
declined to an 8-year low of 30% in the first half, down from 41% a year
earlier. This decline in exploration occurred despite soaring Australian gold
prices, which have historically motivated high exploration expenditure.
Western Australia remained the centre of gold exploration activity inAustralia, accounting for 69% of total gold exploration expenditure.
Revisions to the outlook
Forecast US dollar gold prices have been revised up across the board,due to persistent strength in prices and a rebalancing of price risks
towards the upside. Combining this with a slightly weaker than expected
AUD/USD, Australian dollar gold prices have been revised up across theforecast profile.
Australia’s forecast gold export earnings have been revised up by 8% in
2023–24 compared with the June 2023 Resources and Energy Quarterly.
This reflects upgrades made to forecast prices and a weaker assumed
Australian dollar. Forecast earnings have been revised up marginally in
2024–25 as higher forecast prices fully offset downgrades to export
volumes.
Downgrades to production forecasts (underpinning lower forecast export
volumes) are the result of forecast project commencements being delayed,following updated guidance from companies.

Resources and Energy Quarterly September 2023

108

Table 10.1: Gold outlook
Annual percentage change
World

Unit

2022

2023f

2024f

2025f

2023f

2024f

2025f

Total demandtonnes

4,713

4,260

4,345

4,360

-9.5

2.0

0.3

Fabrication consumption b

tonnes

2,504

2,410

2,620

2,731

-3.6

8.7

4.2

Mine production

tonnes

3,627

3,675

3,750

3,760

0.7

2.0

0.3

– nominal

US$/oz

1,801

1,918

1,833

1,828

6.5

-4.5

-0.3

– real d

US$/oz

1,880

1,918

1,783

1,741

2.0

-7.1

-2.3

Australia

Unit

2021–222022–23s

2023–24f

2024–25f

2022–23f

2023–24f

2024–25f

Mine production

tonnes

306

301

313

312

-1.9

4.2

-0.6

– volumetonnes

248

228

266

265

-7.7

16.6

-0.6

– nominal value

A$m

23,20024,406

23,673

21,441

5.2

-3.0

-9.4

– real value e

A$m25,84425,402

23,673

20,764

-1.7

-6.8

-12.3

– nominal

A$/oz

2,529

2,721

2,767

2,519

7.6

1.7

-9.0

– real e

A$/oz

2,817

2,832

2,767

2,050

0.5

-2.3

-25.9

Price cExports

Price

Notes: b includes jewellery consumption and industrial applications; c London Bullion Market Association PM price; d In 2023 US dollars; e In 2023–24 Australian dollars; s Estimate; f Forecast;
Source: ABS (2023); Department of Industry, Science and Resources (2023); London Bullion Market Association (2023) gold price PM; S&P Market Intelligence (2023); World Gold Council (2023).

Resources and Energy Quarterly September 2023

109

110

111

11.1

SummaryPrimary aluminium prices declined in the September quarter, on theback of rising supply from China and falling global demand.



Sluggish global construction activity is expected to be offset by the
impact of higher demand from vehicle manufacturers, as output rises
and efforts to raise the energy efficiency of vehicles lift aluminium usage
over the outlook period.
Earnings for Australian exports of aluminium, alumina and bauxite are
expected to rise from $16 billion in 2023–24 to $17 billion in 2024–25,
as prices rise over the outlook period.



11.2

World consumption

Sluggish world economic growth reduced demand in mid-2023
A weak Chinese property sector and relatively tight monetary conditions inWestern economies decreased global primary aluminium demand by 0.5%
year-on-year in H1 2023 to nearly 34 million tonnes (Mt). In Europe andthe US, falling primary aluminium demand (down by 17% and 11% yearon-year, respectively) reflected subdued activity in the construction sector.
In contrast, there is strong demand from the EV sector. Strong electricvehicle (EV) sales in China helped drive Chinese aluminium demand up by
3.1% year-on-year in H1 2023 to nearly 21 Mt. Over this period, sales of
new energy vehicles (EVs and plug-in hybrids) rose by 37% year-on-year
to 3.1 million units, while internal combustion engine car sales dropped by
8.0% year-on-year.
In the US, improved consumer sentiment has provided the US automotive
sector with some support in recent months. It is estimated that vehicle
sales will rise from 13.8 million units in 2022 to 15.2 million units in 2023.
The European Union (EU) automotive sector appears to have managed toweather the storms of high inflation and interest rates. EU car registrations
grew by 18% year-on-year in H1 2023 to 5.4 million units. In Germany,
vehicle output was up by 32% year-on-year in H1 2023 to 2.2 million units.

Higher global primary aluminium production boosted the demand foralumina by 1.1% year-on-year in the first half of 2023 to 67 Mt. Demand in
Canada rose by 8.2% year-on-year in the first half of 2023, as Canadianaluminium smelters required more alumina to accommodate increased
primary aluminium production.
Lower global alumina production reduced global bauxite usage by 2.9%
year-on-year in the first half of 2023.
Aluminium, alumina, and bauxite demand to rise over the outlook period
Strong global vehicle manufacturing activity is expected to offset weak
construction activity to help drive global aluminium demand up by 1.0% in
2023 to nearly 69 Mt.
In China, the Government is lifting support for the EV sector. In June, theChinese Government’s passenger electric vehicle (PEV) subsidy was
extended to 2025, with half of this subsidy available until 2027. Thismeasure will support aluminium demand from the Chinese auto sector.
PEV sales in the US are expected to rise in 2023, driven by an
improvement in the supply chain. According to AutoForecast Solutions’April 2023 forecasts, North American automotive production is forecast to
increase by 9.1% year-on-year in 2023 to 15.6 million units.
Beyond 2023, rising sales of energy-efficient vehicles (which are morealuminium intensive) and lower interest rates in 2024 and 2025, areexpected to boost global aluminium demand. In the US and Europe,
housing and commercial building activities are expected to recover wheninterest rates fall, most likely in late 2024 or in 2025.
Electric vehicles drive aluminium demand over the outlook period
A significant driver of aluminium demand is expected to come from world
automakers seeking to reduce vehicle weight by increasing the proportionof aluminium in the vehicle. Aluminium is 10-40% lighter than steel incomparable components. EV makers are particularly focused on reducing
vehicle weight, since it impacts heavily on the driving range of the vehicle.

Resources and Energy Quarterly September 2023

112

Figure 11.2: Electric vehicle (EV) sales and aluminium demand
28

3.5

90

24

3.0

80

20

2.5

16

2.0

12

1.5

8

1.0

4

0.5

100

Million units

70
%

60
50
40
30
20
10
0

Production
Consumption
Export
China
ROW
India
RussiaCanadaBahrain

ImportAustralia

Source: ABS (2023); UN Comtrade (2023); World Bureau of Metals Statistics (2023); Wood
Mackenzie (2023); Department of Industry, Science and Resources (2023)

Strong EV sales will boost aluminium demand over the outlook period. It isestimated that EV sales in China will rise from 8.2 million units in 2023 to
12.8 million units in 2025, Europe (from 3.8 million units in 2023 to 5.2
million units in 2025) and the US (from 1.9 units in 2023 to 3.6 million units
in 2025) (Figure 11.2). With an average aluminium content of 250
kilograms per EV, aluminium usage in EVs in China is forecast to rise from
2.1 Mt in 2023 to 3.2 Mt in 2025, Europe (from 0.9 Mt in 2023 to 1.3 Mt in2025) and the US (from 0.5 Mt in 2023 to 0.9 Mt in 2025) (Figure 11.2).

0

2021
2022
2023
Other - EV sales
Europe - EV sales
US - Al demand for EV (rhs)
China - Al demand for EV (rhs)

Million tonnes

Figure 11.1: Shares of global primary aluminium production,
consumption, exports and imports, 2022

0.0
2024
2025
China - EV sales
US - EV sales
Europe - Al demand for EV (rhs)Other - Al demand for EV (rhs)

Notes: EV sales include battery and hybrid EVs. An estimated average aluminium content of
250 kilograms per EV.
Source: Wood Mackenzie (2023); Department of Industry, Science and Resources (2023)

achieve decarbonisation targets. As a result, world secondary aluminium
usage is forecast to rise from 25 Mt in 2023 to 28 Mt in 2025.

Decarbonisation likely to boost demand for secondary aluminium

An expected rise in global primary aluminium production is likely to drive
higher demand for alumina over the outlook period. In line with world
primary aluminium production, world alumina consumption is forecast to
grow by 2.1% in 2023, 2.3% in 2024 and 1.4% in 2025.

Demand from automotive and construction market participants withdecarbonization targets will boost demand for secondary aluminium
consumption over the outlook period, reaching 28 Mt by 2025. CRU
expects secondary aluminium to account for over 50% of US aluminium
demand by 2028. Other industrialised nations such as Germany, Japan,
Italy and South Korea will also lift their secondary aluminium usage to

An expected fall in Australia’s alumina production is likely to reduce global
bauxite consumption by 0.7% in 2023 to 360 million tonnes. Australia is
the world’s second largest alumina producer, accounting for around 14%
of global alumina production. Beyond 2023, an expected improvement inAustralia’s alumina refining operations will lift global alumina output, andtherefore, global bauxite consumption.

Resources and Energy Quarterly September 2023

113

11.3

World production

China’s restarts boosted global primary aluminium output in H1 2023
The restart of China’s major aluminium producing cities largely contributed
to a 1.1% year-on-year rise in the global primary aluminium output in thefirst half of 2023. In Yunnan Province (China’s fourth largest producing
province), local aluminium smelters have restarted over 1.1 Mt a year
capacity since mid-June 2023, as the supply of hydropower improves.

Primary aluminium production in Brazil is forecast to increase from 1.2 Mt
in 2023 to 1.3 Mt in 2025. In Europe, primary aluminium production is
forecast to increase from 6.8 Mt in 2023 to 7.2 Mt in 2025, as lower energy
prices support a restart of idled capacity.

Figure 11.3: Shares of global alumina production,
consumption, exports and imports, 2022
100
90

A production lift at Alumar aluminium smelter boosted Brazilian primaryaluminium output to 493,000 tonnes in H1 2023, up 39% year-on-year.

Lower alumina output in Australia led to a 3.4% year-on-year fall in global
alumina output in the first half of 2023 to nearly 69 Mt. Over this period,
production in Australia — the world’s second largest alumina producer —fell by 2.9% year-on-year to 9.6 Mt, due to lower production at Rio Tinto’s
Queensland Alumina Limited (QAL) refinery in Queensland.
Indonesia’s alumina output rose by 7.3% year-on-year in the first half of2023, propelled by production ramp-up at the 300,000 tonnes a year
Tayan alumina refinery.
Higher output in Guinea — the world’s largest bauxite producer —increased world bauxite production by 0.6% year-on-year in the first half of2023 to 194 Mt.
Aluminium and alumina output set to rise over the outlook period
Production ramp-ups in China and Brazil and the restart of idled capacityin Europe are expected to drive global primary aluminium output higher in
H2 2023 and over the rest of the outlook period. In China, primaryaluminium output is forecast to rise from 42 Mt in 2023 to 43 Mt in 2025.
By the end of the outlook period, primary aluminium production will edge
closer to the maximum production cap of 45 Mt a year set by the Chinese
Government in 2017.

70
60
%

Higher production at Rio Tinto’s 150,000 tonnes a year Kitimat aluminium
smelter boosted Canadian primary aluminium output to 1.6 MT in the firsthalf of 2023, up 8.2% year-on-year.

80

50
40
30
20
10
0

Production
Consumption
China
Australia
ROW
BrazilExportIndia
UAE

ImportRussiaSource: ABS (2023); UN Comtrade (2023); World Bureau of Metals Statistics (2023); Wood
Mackenzie (2023); Department of Industry, Science and Resources (2023)

The Alba Aluminium smelter in Bahrain completed a pre-feasibility study
for its Line 7 expansion project in the September quarter 2022. It is highly
likely that the proposed Line 7 project will start in 2023. Once completed, it
will increase the smelter’s output from 1.56 Mt in 2021 to 1.68 Mt in 2024.
Russian aluminium producer, Rusal, and the Nigerian government havediscussed a possible restart of 200,000 tonnes a year Alscon aluminium
smelter in Nigeria. The smelter ceased operation in 2012, due to low
aluminium prices and a lack of reliable gas supply.
The failure to reach an energy supply deal between Rio Tinto and theenergy supplier for its 341,000 tonnes a year Tiwai Point aluminium

Resources and Energy Quarterly September 2023

114

Driven by the increasing demand for recycled aluminium, global secondary
aluminium output is forecast to rise from 32 Mt in 2023 to 36 Mt in 2025.
China accounts for most of this increase, with secondary aluminium
production forecast to rise from 12 Mt in 2023 to 14 Mt in 2025.
Rio Tinto’s 30,000 tonnes a year Arvida recycling facility in Quebec,
Canada, is expected to be commissioned in the March quarter 2025. In
July 2023, Rio Tinto and Giampaolo Group (one of North America’s largest
fully integrated metal management businesses) entered into an agreement
to form a joint-venture to manufacture and market recycled aluminium
products. Hydro’s Navarra and Sjunnen recycling facilities in Spain and
Sweden are adding 20,000 tonnes a year each more output.
Rising output from new/existing refineries in China, Spain and Indonesia is
expected to drive up global alumina output over the outlook period. Around
3.6 Mt of new alumina capacity is expected to come online in 2023. In
China, alumina production is expected to continue to rise, worsening themarket surplus in 2023. In Spain, Alcoa’s 1.2 Mt a year San Ciprianalumina refinery has lifted output. In Indonesia, China Aluminium
Company and the Indonesian joint-venture partners’ 2 million tonnes a
year Mempawah alumina refinery, is expected to come online in 2024. It is
expected that eight more alumina refineries will be built in Indonesia in the
coming years, with a total capacity addition of around 10 Mt.
In Australia, Rio Tinto has revised its 2023 alumina guidance for its QAL
refinery in Queensland down to 7.4 Mt from 7.7 Mt. The downward revisionreflects the company’s implementation of initiatives to improve the QAL
refinery’s operational stability.
Global alumina output is estimated to fall by 0.7% in 2023 to 142 Mt,
before resuming to grow in 2024 and 2025.

Figure 11.4: Shares of global bauxite production, consumption,
exports and imports, 2022
100
80
60
%

smelter in New Zealand is another risk to the assessment. The current
energy supply agreement is to expire by end 2024. At the time of writing,both Rio Tinto and energy supplier (Meridian Energy) had not reached a
new long term power supply agreement.

40
200GuineaProduction
Australia

Consumption
China
ROW

ExportIndonesia

India

ImportRussiaSource: ABS (2023); UN Comtrade (2023); World Bureau of Metals Statistics (2023); Wood
Mackenzie (2023); Department of Industry, Science and Resources (2023)

The Indonesian bauxite export ban (commenced in June 2023) is
expected to reduce global bauxite production in 2023. Indonesia produced
22 Mt of bauxite in 2022 (accounting for 5.7% of global output, 5th largest
producer) and exported 18 Mt of bauxite in 2022 (11% of global bauxite
exports, third largest exporter). With the current domestic bauxite
consumption of around 9.0 Mt a year, a cut in production seems to be theonly viable option for Indonesian bauxite producers.
World bauxite production is expected to grow by 2.1% in 2023, 3.7% in
2024 and 3.5% in 2025. Australia and Guinea are expected to contributemost to this rise. In Guinea, Alliance Mining Commodities launched the 1.5
billion tonnes (estimated reserve) Koumbia bauxite project in mid-February
2023. A recent feasibility study found that the project is commercially
viable and will require a capital investment of over US$1 billion.
Vietnam is planning to build three new bauxite mines in the northern
region with a combined capacity of 2.0 Mt a year. Vietnam has the second
largest bauxite reserves in the world (estimated 5.8 billion tonnes) after
Guinea with an estimated reserve of 7.4 billion tonnes.

Resources and Energy Quarterly September 2023

115

Green aluminium, alumina and bauxite
Globally, producers are moving with plans to decarbonise aluminium
supply chains. In partnership with Sumitomo, and with A$32.1 million cofunding support from the Australian Renewable Energy Agency (ARENA),
Rio Tinto will build a hydrogen pilot plant in Gladstone, Queensland, in
2024 to trial lower carbon alumina refining. The plant is a part of Rio
Tinto’s A$111.1 million Yarwun Hydrogen Calcination Pilot Demonstration
Program aimed at demonstrating the viability of using hydrogen as areplacement for natural gas in the alumina calcination process.
In the June quarter 2023, Hydro’s Navarra recycling facility in Spain
produced the first batch of recycled aluminium using green hydrogen as anenergy source.
In India, Hindalco aims to ramp up production of low carbon aluminium
output to 30% of its output within the next four years. The 100 megawatt
capacity pilot project — where a renewable energy provider to power
supply from pumped water storage to its 365,000 tonnes a year Aditya
aluminium smelter — is expected to commence operations in 2024.

11.4

World trade

Weak aluminium, alumina and bauxite exports in H1 2023
Lower exports from Russia reduced global primary aluminium exports by
13% year-on-year to 6.5 Mt in H1 2023. Despite no direct sanctions on
Russian aluminium by Western nations, Russia’s share of world primaryaluminium exports fell from 12% in H1 2022 to 7.3% in H1 2023.
Offsetting the fall in aluminium exports from Russia was higher primaryaluminium exports from the Netherlands (up 10% year-on-year in H12023) and Australia (up 10% year-on-year in H1 2023).
The slower than expected restart of idled primary aluminium capacity inEurope reduced world secondary aluminium exports in the first half of2023. European aluminium users turned to secondary aluminium as a
substitute for primary aluminium. As a result, less secondary aluminium
was available for export, which declined by 8.9% year-on-year.

Lower alumina exports from Australia — the world’s largest alumina
exporter — cut global alumina exports by 7.9% year-on-year in the firsthalf of 2023 to 19 Mt. Over this period, Australian alumina exports to India
fell 40% year-on-year, as Indian alumina importers reduced their imports.
Lower bauxite exports from Australia — the world’s second largest bauxite
exporter — reduced global bauxite exports by 8.8% year-on-year in thefirst half of 2023 to 76 million tonnes. Over this period, higher than averageannual rainfall in northern Australia slowed down bauxite exports frommines in the Northern Territory and Queensland.
Guinea exported 52 million tonnes of bauxite in the first half of 2023, up
6.9% year-on-year.
Lower aluminium imports from Europe and the US
Weak primary aluminium consumption in Europe and the US reduced
global primary aluminium imports by 11% year-on-year in the first half of2023. Over this period, German and Italian primary aluminium imports
decreased by 18% and 27% year-on-year, respectively. In the US, primaryaluminium imports fell by 1.6% year-on-year in the first half of 2023.
Higher imports by China offset the fall in European and US imports. In H1
2023, China imported 490,000 tonnes of primary aluminium, a rise of
145% year-on-year. Aluminium demand from the automotive and solar
energy sectors was the driving force behind China’s increased imports.
Lower European imports reduced global secondary aluminium imports by
1.6% year-on-year in H1 2023. Many European countries reduced
secondary aluminium consumption to deal with slowing construction
activities. In Poland, secondary aluminium imports in the first half of 2023
fell by 16% year-on-year to 168,000 tonnes. Over this period, Italy’s
secondary aluminium imports fell by 4.9% year-on-year to 97,000 tonnes.
Higher alumina production in India reduced global alumina imports by
6.2% year-on-year in H1 2023. Over this period, India imported 1.2 Mt ofalumina (down by 8.8% year-on-year). Russia’s alumina import data is notavailable and is not included in this assessment.

Resources and Energy Quarterly September 2023

116

Lower bauxite imports from Europe reduced global bauxite imports by
2.2% year-on-year in H1 2023. Over this period, Spain imported 810,000
tonnes of bauxite (down 59% year-on-year). In Ireland, bauxite imports fellby 57% year-on-year in H1 2023.
More Russian primary aluminium entering Chinese market
China’s imports of Russian primary aluminium have increased significantly
so far in 2023; from 313,717 tonnes in the second half of 2022 to 416,943
tonnes in the first half of 2023. On a monthly basis, Russia’s share of
China’s total primary aluminium imports reached a record high in June
2023, accounting for 94% of China’s total primary aluminium imports(Figure 11.5).
Chinese imports are likely to rise further over the forecast period, asinternational buyers cease buying Russian aluminium.
Figure 11.5: China’s primary aluminium import sources
100
90
80

11.5

PricesSluggish Chinese economic growth is a headwind to aluminium prices
Rising supply and weak world demand have pushed prices down fromlevels averaged in the June quarter. Demand has suffered from the impactof tighter monetary policy in the Western economies and sluggish
economic growth in China. The London Metal Exchange (LME) spot pricefor primary aluminium has decreased 5.9% so far in 2023, sitting at
US$2,200 a tonne on 22 September 2023 — compared to an average of
US$2,830 a tonne in the first nine months of 2022.
Low aluminium stocks have helped prevent deeper price falls as world
demand weakens (Figure 11.6). LME stocks have fallen from a 7-monthhigh of 579,525 tonnes in May 2023 to 482,300 tonnes in September
2023. Shanghai Future Exchange aluminium stocks followed the same
trend, falling from an eleven-month high of 295,920 tonnes in February
2023 to 90,293 tonnes in September 2023. LME off-warrant stocks fell
from a fourteen-month high of 435,869 tonnes in January 2023 to 291,754
tonnes in July 2023.

Figure 11.6: Exchange aluminium stocks

70

6

60

5

40

4

Million tonnes

% 50
30
20
10
0
Jun-21
RussiaDec-21
India

Oman

Jun-22

Dec-22Australia

New ZealandNotes: ROW: Rest of the world
Source: China Customs

Jun-23ROW

3
2
1
0
Sep-13
Sep-15
Sep-17
LME aluminium stocks
Off-Warrant stocks

Sep-19Sep-21
Sep-23
Shanghai aluminium stocks

Source: London Metal Exchange (2023); Bloomberg (2023)
Resources and Energy Quarterly September 2023

117

The free on board (FOB) Australian alumina price has fallen by 3.6% so
far in 2023, at US$341 a tonne on 22 September 2023 — and compares toan average price of US$376 a tonne in the first nine months of 2022.
The prospect of rising Chinese aluminium supply and sluggish Chinese
economic growth (see the Macroeconomic chapter) is likely to be aheadwind to aluminium prices over the rest of 2023. As a result, the LME
primary aluminium spot price is estimated to average US$2,300 a tonne in
2023, a fall of 15% year-on-year (Figure 11.7). The LME aluminium priceis forecast to average US$2,415 and US$2,500 a tonne in 2024 and 2025,
respectively (Figure 11.7).
New alumina capacity additions — about 3.6 Mt of new capacity in 2023
— are likely to put alumina prices under pressure. The free on board(FOB) Australian alumina price is estimated to decrease by 5.5% in 2023
to an average US$344 a tonne (Figure 11.7). Growing global demand for
new, energy-efficient cars and technologies will boost aluminium usage
and prices over the outlook period. The FOB Australian alumina price isforecast to rise at an average annual rate of 1.1%, averaging US$352 atonne in 2025 (Figure 11.7).

3,000

500

2,600

440

2,200

380

1,800

320

1,400

260

1,000

2015

2017
2019
2021
2023
2025
Average LME aluminium price
Average FOB Australia alumina price (rhs)200

Australian exports and production

Lower aluminium and alumina prices reduced exports in 2022–23
Lower primary aluminium and alumina prices and alumina export volumes
cut Australia’s aluminium, alumina and bauxite (AAB) exports by 4.7% in
2022–23 to $16 billion. A 19% year-on-year fall in the LME aluminium
price in 2022–23 reduced Australian primary aluminium export values by
7.4% year-on-year to $5.3 billion in 2022–23. Over this period, primaryaluminium exports to Japan and the US fell by 13% and 11% year-on-year
to $1.3 billion and $0.5 billion, respectively. Largely offsetting the fall inexports to Japan and the US was a 50% year-on-year rise in exports toSouth Korea to $1.5 billion.
A 10% year-on-year fall in alumina prices reduced Australian alumina
export values by 7.1% in 2022–23 to $8.3 billion. In 2022–23, Australianalumina export volumes were down by 6.3% year-on-year to nearly 17 Mt.
Australian bauxite export values increased by 12% year-on-year in 2022–
23 to nearly $1.3 billion, despite a 4.6% year-on-year fall in bauxite export
volumes. China accounted for 98% of total Australian bauxite exports in2022–23. A ban on bauxite exports by Indonesia — which started on 10
June 2023 — seems to have assisted Australian bauxite exporters.
Provisional trade data for July 2023 shows a 14% year-on-year or 12%
month-on-month rise in Australian bauxite exports to China (Figure 11.8).
Higher alumina, aluminium and bauxite export earnings in prospect

US$ a tonne

US$ a tonne

Figure 11.7: Primary aluminium and alumina prices

11.6

An expected rise in primary aluminium prices and higher alumina andbauxite export volumes are likely to boost Australian AAB export earnings
from $16 billion in 2023–24 to $17 billion in 2024–25 (Figure 11.9).
Australian alumina exports to India are expected to rise over the outlook
period, as Indian alumina demand exceeds alumina production (Figure11.10). In 2022–23, Australia exported 682,000 tonnes of alumina to India,
accounting for 4.1% of Australia’s exports. India is prioritising expenditure
on EV and renewable energy infrastructure and battery supply chains.

Source: Bloomberg (2023); Department of Industry, Science and Resources (2023)
Resources and Energy Quarterly September 2023

118

Figure 11.8: Australia’s bauxite exports to China, monthly

106Million tonnes

Million tonnes

8

4
2
0

2018

2020
2022
Alumina production

2024
2026
Alumina consumption

2028

4.0

100

3.5

99

3.0

98

2.5

97

2.0

96

1.5

95

1.0

94

0.5

93

0.0
Jul-20Source: CRU (2023); Wood Mackenzie (2023); Department of Industry, Science andResources (2023)

Australian primary aluminium output was virtually flat in 2022–23 at 1.52
Mt. In mid-March 2023, Alcoa announced an immediate 25% production
cut at Portland Aluminium amid operational instability.
Unplanned outages and plant reliability issues at Rio Tinto’s Queensland
Alumina Limited alumina refinery in Queensland cut Australian alumina
output by 4.4% in 2022–23 to 19 Mt. In January 2023, Alcoa declared‘force majeure’ — triggering a contract clause to remove liability for
unforeseeable and unavoidable events that interrupt normal business —due to disruptions in natural gas supply to its operations in WA. About 20%(or 438,000 tonnes) of refining capacity at the Kwinana plant still curtailed.
On 26 April 2023, Alcoa lifted the force majeure for its Kwinana operation.
Above average annual rainfall reduced pit access and speed limits formobile equipment at Rio Tinto’s Gove bauxite mine in the Northern
Territory and the Weipa bauxite mine in Queensland. As a result,
Australian bauxite output fell by 1.8% in 2022–23 to 100 Mt.

VolumeJul-21

Jan-22

Jul-22

Jan-23

92
Jul-23

Share of Australia's total bauxite exports

Source: ABS (2023) International Trade in Goods and Services, 5368.0

Figure 11.9: Australian aluminium/alumina/bauxite exports
18
16
14
12
$ billion

Australia’s alumina/aluminium/bauxite production fell in 2022–23

Jan-21%Figure 11.10: India’s alumina production and consumption

10
8
6
4
2
0

2014–15
2016–17
2018–19
Aluminium
BauxiteAluminium waste and scrap

2020–212022–23
2024–25
AluminaHigh purity alumina

Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department ofIndustry, Science and Resources.

Resources and Energy Quarterly September 2023

119

Higher bauxite output over the outlook period
Over the outlook period, an expected improvement in Australian smelting
operations is likely to bring Australian primary aluminium output back tonormality, at 1.6 Mt of primary aluminium a year (Figure 11.11).
Alcoa Australia has signed a new nine-year agreement with AGL to supply
a proportion of the electricity requirement of Portland Aluminium smelter inVictoria to 30 June 2035.
An expected improvement in refining operations in Queensland and in
Worsley (WA) offset lower alumina output from Alcoa’s refineries in WA.
Alcoa is still waiting for approval from the WA government for its MineManagement Program — usually approved annually on a 5-year basis.
While waiting for approval, Alcoa will have to mine lower grade bauxite inapproved areas until mid-2024. The company’s short-term alumina output
is expected to vary (to the downside) depending on bauxite grades. As aresult, Australia’s alumina output is forecast to fluctuate around the 20 MT
a year level (Figure 11.11).

High purity alumina (HPA) projects continue to progress.
The Western Australian Government has allocated $3 million from its
Investment Attraction Fund for FYI Resources to develop its 900 tonnes a
year HPA project. Alpha HPA will go ahead with its $300 million second
stage of its HPA First project in Gladstone, Queensland. In April 2023, thecompany received a $21.7 million grant from the Queensland Government.
Stage 1 of the project has been in operation since late 2022, producing 5N(99.99%) purity aluminium nitrate in commercial quantities. Stage 2
involves the production of aluminium sulfate, HPA, nano HPA and highpurity aluminium hydroxides.
Impact Minerals bought an 80% interest in the Lake Hope HPA project in
WA. It is a high-grade alumina prospect with an estimated alumina content
of at least 775,000 tonnes, most of which can be processed to HPA.
Further drilling is occurring, and a pre-feasibility study is ongoing.

120

1.8

Revisions to the outlook

100

1.5

80

1.2

The forecast for Australia’s AAB export earnings in 2023–24 has beenrevised up from the June 2023 REQ — by $376 million. The revisionreflects higher forecasts for Australia’s alumina export values.

60

0.9

40

0.6

20

0.3

0

2014–15

2016–17
Alumina2018–19 2020–21 2022–23 2024–25
BauxiteAluminium (rhs)

Million tonnes

Million tonnes

Figure 11.11: Australian aluminium/alumina/bauxite output

The expansion of Metro Mining’s Bauxite Hills in Queensland from 3.5 Mt
a year to 7 Mt a year is forecast to drive Australian bauxite output up by
4.4% a year to 109 MT in 2024–25 (Figure 11.11).

The forecast for Australia’s AAB export earnings in 2024–25 has beenrevised up from the June 2023 REQ by $204 million. The revision reflects
lower forecasts for Australian dollar.

0.0

Source: Department of Industry, Science and Resources (2023)
Resources and Energy Quarterly September 2023

120

Box 11.1: Gallium — A by-product of processing bauxite

Figure 11.12: Shares of world gallium production

Gallium is a chemical element which has the unusual property of melting
at room temperature. Unlike other resource commodities that are
extracted directly from the earth, gallium is a by-product of processing
bauxite — the main raw material for producing alumina and aluminium.

China’s dominance in gallium is closely tied to the growth of its aluminium
industry. Chinese aluminium smelters are required to create the capacity
to extract gallium. As a result, China produced 423,000 kilograms ofgallium in 2021, accounting for 97% of world gallium output (Figure11.12).
To secure a stable bauxite supply, over the last decade China’s private
and public sectors have invested to lift Guinean bauxite production
capacity — which has the world’s largest bauxite reserves. In 2022,
Guinea accounted for 56% of China’s bauxite imports. Australia andIndonesia (before its bauxite export ban) were the 2nd and 3rd largest
source of Chinese bauxite imports in 2022 (Figure 11.13). Australia is theworld’s second biggest bauxite producer and its 2nd biggest exporter; weare the world’s second biggest alumina producer and its largest alumina
exporter.

99
98
97
%

Gallium plays a critical role in a range of novel technologies, from LED
lighting solar cells to high efficiency semiconductors for a range ofconsumer and defence applications. It is used in phased array radars,
electronic warfare systems, satellite communications system, 5G wirelessbase stations, mobile phones; optoelectronics: LED lighting, lidar, infraredlasers; power electronics: spacecraft power management, fast chargers(EVs and consumer electronics), data centres, power grid management;
and clean energy: solar cells, neodymium iron boron magnets for EVs.
Gallium nitride is now gaining traction for rapid charging devices. The
Navitas Semiconductor company in the US is developing a gallium nitride
charging system which could lower the charging time for EVs by 33%.

100

96
95
94
93
92

2017
China

2018
2019
Japan
South Korea

2020
2021
RussiaUkraineSource: US Geological Survey (2023), 2021 Annual Tables

Figure 11.13: Shares of China’s bauxite imports, 2022
GuineaAustralia
Indonesia
Malaysia
Jamaica
0

10

20

30
%

40

50

60

Source: Bloomberg (2023)
Source: National Library of Medicine; Forbes, Sourcing gallium for American semiconductor
supremacy; The United States Centre for Strategic and International Studies, De-risking
gallium supply chains; US Geological Survey, Compilation of gallium resource data forbauxite deposits; Department of Industry, Science and Resources.

Resources and Energy Quarterly September 2023

121

Table 11.1: Aluminium, alumina and bauxite outlook
Table 11.1:
Aluminium alumina
World
Primary aluminium
Production
Consumption
Prices aluminiumc- nominal- reald
Prices alumina spot
- nominal- reald
Australia
Production
Primary aluminium
Alumina
BauxiteConsumption
Primary aluminium
Exports
Primary aluminium- nominal value- real valuee
Alumina- nominal value- real valuee
Bauxite- nominal value- real valuee
Total value- nominal value- real valuee

Annual percentage change
Unit

2022

2023 s2024 f

2025 f

2023 s2024 f

2025 fkt
kt

68,52968,05070,30168,734

71,94972,64972,93173,816

2.6
1.0

2.3
5.7

1.4
1.6

US$/t
US$/t

2,708
2,827

2,300
2,300

2,415
2,349

2,500
2,381

-15.1
-18.7

5.0
2.1

3.5
1.4

US$/t
US$/t
Unit

365
381
2021–22344
344
2022–23

345
336
2023–24 f

352
336
2024–25 f

-5.5
-9.5
2022–23

0.2-2.6
2023–24 f

2.1
0.0
2024–25 f

kt
kt
Mt

1,525
20,138102.3

1,524
19,242100.4

1,558
20,108106.6

1,559
20,446
109.4

-0.1
-4.4
-1.8

2.2
4.5
6.2

0.1
1.7
2.6

kt

501

314

264

264

-37.3

-16.0

0.0

kt
A$m
A$m
kt
A$m
A$m
kt
A$m
A$m

1,368
5,710
6,360
17,7398,977
10,00035,957
1,177
1,311

1,441
5,283
5,499
16,566
8,308
8,647
34,031
1,280
1,333

1,418
4,887
4,887
17,4948,773
8,773
40,306
1,414
1,414

1,419
4,809
4,657
17,7888,664
8,390
43,181
1,538
1,489

5.3
-7.5
-13.5
-6.6
-7.5
-13.5
-5.4
8.8
1.7

-1.6
-7.5
-11.1
5.6
5.6
1.5
18.4
10.4
6.1

0.1
-1.6
-4.7
1.7
-1.2
-4.4
7.1
8.8
5.3

A$m
A$m

16,854
18,77416,007
16,66016,36016,36017,302
16,755

-5.0
-11.3

2.2
-1.8

5.8
2.4

Notes: Total nominal and real values of Australian exports include primary aluminium, aluminium waste and scrap, alumina, high purity alumina and bauxite. c LME cash prices for primaryaluminium; d In 2023 calendar year US dollars; e In 2023–24 financial year Australian dollars; f Forecast; s Estimate. Sources: ABS (2023) International Trade in Goods and Services, 5368.0;
Bloomberg (2023); London Metal Exchange (2023); Department of Industry, Science and Resources (2023); World Bureau of Metals Statistics (2023)
Resources and Energy Quarterly September 2023

122

123

124

12.1

Summary

Figure 12.1: Refined copper consumption
20%

12

10%

8

0%

 Global copper consumption is expected to grow by 2.8% in 2023. China
is expected to account for the bulk of this growth, with other major
markets expected to see low growth or modest declines.

4

-10%

 Australian export earnings of copper are forecast to reach around$12.5 billion in 2023–24. Higher Australian production and export
volumes will see export earnings reach $12.8 billion in 2024–25.

0

12.2

World consumption

China’s below-expectations recovery still boosting copper demand in 2023
Global refined copper consumption grew by 6.6% (year-on-year) in the firsthalf of 2023, to reach more than 13.5 million tonnes (Figure 12.1).
By region, growth in China’s consumption (11% increase over the period)and Rest of Asia helped to offset falls in Europe and the United States(down 10%). Global growth in copper consumption is expected to slacken
in the second half of 2023, following renewed challenges in China’s
property sector and softening global growth prospects for other major
markets.
Following a rebound in early 2023, China’s manufacturing activity has
softened in recent months. Weak growth in the industrial sector reflects the
sluggish recovery in domestic consumption so far this year, as well as a
slowdown in China’s global trade. China’s construction sector isexperiencing continued pressure, with new starts in the year to July
continuing to fall year-on-year (see Macroeconomic Outlook chapter).

Resources and Energy Quarterly September 2023

Million tonnes

16 Copper prices have continued to trend lower in recent months. This
follows a weaker-than-expected economic recovery in China in 2023, as
well as a deteriorating outlook for construction and manufacturing inother major markets such as Europe and ex-China Asia.
 The benchmark LME copper price is expected to average around
US$8,300 a tonne for the second half of 2023 (compared with around
US$8,700/t in the first six months of this year).

World

China

Rest of
Asia

First six months of 2023

EuropeUS

Rest of
world

-20%

Year-on-year growth (RHS)

Source: World Bureau of Metal Statistics (2023); Department of Industry, Science andResources (2023)

However, China’s copper consumption has been bolstered by its newenergy sector, with the central government continuing to make large
investments in energy infrastructure (particularly in renewable energy) in
2023. Total investment in this sector in the first half of 2023 increasedaround 7.8% year-on-year and is expected to account for a rapidly growing
share of the country’s copper demand in coming years.
China’s electric vehicle manufacturing sector has also seen further growthin 2023, with pure EV passenger vehicle production in the year-to-Junerising 16% year-on-year. Despite ending subsidies to buyers of EVs at theend of 2022, in June China’s central government announced new tax
incentives that would exempt taxation on any new energy vehicle
purchased through to the end of 2025.

125Construction alleviating a weaker manufacturing outlook in ex-China Asia
A progressively weakening global trade environment through 2023
appears to have increasingly dampened manufacturing activity amongst
other major industrial economies in Asia. Industrial production in the
Advanced Asia region fell 9.1% year-on-year in May, and manufacturing
PMIs in July point to near-term contractionary conditions for key producers
such as Japan, South Korea, Taiwan and Vietnam.

Amongst other major consumer markets, European sales grew by 25%,
while the United States saw growth of more than 50% year-on-year.
Strong results were also seen in emerging EV consumer markets, included
a tripling in collective sales for India, Thailand and Indonesia.
The IEA, as part of its Global EV Outlook 2023 expects a significant ramp
up in the second half of the year, with global sales projected to reach
14 million units for the full year 2023. This comes despite lingering
weakness in the broader global automotive sector, and would see electricvehicles account for close to 1 in 5 car sales across the full calendar year.

Meanwhile, construction activity in much of the region continues to bolster
overall copper demand, with strong (albeit slowing) growth across all threesubsectors (residential, commercial and infrastructure). Countries such as
India, Philippines and South Korea continue to show healthy current
workloads, which will help to mitigate near-term global headwinds faced bytheir respective manufacturing sectors.

Copper consumption is expected to grow by 1.9% annually to 2025,
supported by the considerable infrastructure works planned or underway in
key regions (particularly from the energy sector), as well as continuing
penetration of EVs in the global automotive sector.

Europe’s manufacturing and construction facing further challenges

Figure 12.2: Mined copper production
12

20%

10

15%

Despite an ambitious medium-term outlook for the region associated with
its NextGenerationEU plan, the European construction sector also
continues to face challenges in 2023. Euro Zone construction output has
been flat (in year-on-year terms) for much of the year, while a PMI readingof 43.5 for the sector in July suggests further near-term contractionary
conditions in the second half of this year.

8

10%

6

5%

4

0%

2

-5%

Global EV sales a key growth sector for copper demand over the outlook
Global passenger and light duty EV sales are estimated to have reached
5.7 million units in the first half of 2023, around 35% higher year-on-year.
China — representing around 60% of the market in 2022 — continues tosee strong growth in 2023, reaching more than 3 million units sold in thefirst half of the year, at an annual growth rate of more than 30%.

Resources and Energy Quarterly September 2023

Million tonnes

Europe’s manufacturing sector has continued to experience contractionary
conditions in recent months. Industrial production in the Euro Area fell
1.6% year-on-year in July, while the region’s manufacturing PMI (42.7 inJuly this year) represents the weakest reading since 2020 COVID-lows.

0

World

Chile

Peru

First six months of 2023

DRC

China Indonesia Rest ofworld
Year-on-year growth (RHS)-10%

Source: World Bureau of Metal Statistics (2023); Department of Industry, Science andResources (2023)

126

12.3

World production

Global mined copper output falls slightly in the first half of 2023
Global mined copper production is estimated to have reached 10.4 million
tonnes in the first half of 2023, a fall of 1.0% year-on-year. Amongst major
producers, this included year-on-year falls in output for Chile (-4.0%), theDemocratic Republic of the Congo (-6.8%) and Indonesia (-5.7%)(Figure 12.2).
Contributing to the fall in Chile’s output was Codelco, the world’s largest
copper miner. The company reported a 12.6% reduction (year-on-year) in
output for the first half of 2023, citing operational difficulties due to weather
conditions and lower ore grades. This was the company’s lowest
production result in 25 years. However, this was partially offset by 9%higher (year-on-year) production from the BHP joint venture, Escondida for
the full financial year 2022–23, due to improved grades.
Peru was the only major producer to see output rise over the first half ofthe year, growing 20% year-on-year. This included higher production from
Peru’s newest major copper mine, Quellaveco. The operation — a joint
venture between Anglo American (60%) and Mitsubishi (40%) — hit
nameplate capacity during the June quarter 2023 and is expected to reach
300,000 tonnes of output annually by the end of the outlook period.

In the Democratic Republic of the Congo, Kamoa-Kakula achieved aquarterly record for production of over 100,000 tonnes in the June quarter
2023. The company, which started production in 2021, is targeting
650,000 tonnes in 2025, which is expected to solidify the DRC as theworld’s second largest producer by the end of the outlook period.
Despite the positive outlook for global mine production, key downside risks
remain around declining ore grades, higher production costs, ageing
facilities and increased environmental and social scrutiny for producers.
China leading refined copper production growth
Refined copper production grew 6.9% year-on-year for the first half of2023, to reach around 13.5 million tonnes (Figure 12.3). This included
significant growth in China — the world’s largest producer with almost 50%
of world refined output — over the period. This helped to offset falls
amongst other major producers such as Europe and Chile.

Figure 12.3: Refined copper production

Improved growth in mined copper production is expected over the next two
years, with the majority of the increase coming from Chile and the
Democratic Republic of Congo.
In Chile, the Escondida expansion is expected to add 200,000 tonnes toChile’s copper production from 2024. Teck Resources’ Quebrada Blanca
Phase 2 operation also produced its first copper concentrate in the March
quarter 2023. Due to delays in construction and commissioning, thecompany has recently guided 80,000 to 100,000 tonnes of production in
2023, but expects to be operating at full production (300,000 tonnes perannum) from 2024.

Resources and Energy Quarterly September 2023

Million tonnes

Mined copper to grow by around 6.3% annually to 2025

14

25%

12

20%

10

15%

8

10%

6

5%

4

0%

2

-5%

0

World

China

EuropeFirst six months of 2023

Chile

DRC

Rest ofworld
Year-on-year growth (RHS)-10%

Source: World Bureau of Metal Statistics (2023); Department of Industry, Science andResources (2023)

127

12.4

Prices

1,400

Soft Chinese recovery and global headwinds currently weighing on prices

1,200

From a peak of US$8,900 a tonne in March this year, copper prices havecontinued to trend lower in recent months, averaging US$8,340 a tonne inAugust. The fall follows the slower-than-expected recovery in China so far
in 2023, and a poorer outlook for construction and manufacturing in someother key markets, such as Europe and ex-China Asia.

1,000
800
600
400
200

0
2018
World inventory

2019
2020
2021
2022
2023
Inventory at major exchanges Refined copper stocks in China

Source: Bloomberg (2023)

Despite the weaker-than-expected rebound in China’s economy so far in
2023, domestic refiners significantly boosted production in the first half ofthe year. While low inventories and stronger refining charges havecontributed to this domestic expansion, the significant fall (more than 12%)in China’s imports of refined copper over the same period have impeded
any significant build-up in inventories so far in 2023 (Figure 12.4).
However, the market expectation is for some increase in copper stocks in
the rest of the year, as part of China’s usual seasonal ramp up in
inventories.
Global refined copper production is forecast to reach around 27.1 million
tonnes in 2023 and grow by around 0.7% annually through to 2025. This is
expected to be led by new capacity build-outs in China and India.
Indonesia is also forecast to drastically increase copper refining output inthe next few years to 2025, a consequence of a 2018 government policy toprocess all ores domestically. The country’s largest mine PT Freeportcurrently has construction underway on its new 600,000 tonne per year
Manyar Maju refinery, with first production expected in H2 2024.
Resources and Energy Quarterly September 2023

While Chinese copper consumption had a healthy rise (year-on-year) in
the first half of 2023, a significant increase in the country’s refined copper
production over the same period has helped to maintain a relatively evendemand-supply balance. Weakening demand for copper in other major
markets (such as Europe and the US) over the first half of the year
contributed to recent price falls.
Prices are expected to average around US$8,300 a tonne in H2 2023
(Figure 12.5). Lead indicators suggest near-term weakness in global
manufacturing, and in construction activity in key markets such as Europe.
China is also expected to face further challenges in its manufacturing andconstruction sectors in coming months that will act as a further drag on
global demand in the near term.

Figure 12.5: Copper price
12,00010,000
US$/tonne

Thousand tonnes

Figure 12.4: Global copper inventories

8,000
6,000
4,000
2,000
0
2016

2017

2019

2020

2022

2023

2025

Source: LME (2023) official cash price, refined128Despite solid growth in global copper consumption over the outlook period,
increased production from Chile, Peru and Indonesia looks set to push thecopper market into a surplus and lead to weaker copper prices over theforecast horizon. The benchmark LME copper price is expected to averagearound US$8,300 a tonne in 2024 and US$9,000 a tonne in 2025.

12.5

Australia

Falling copper price to offset stronger export volumes to 2024–25
Exports are estimated to have been about $12.3 billion in 2022–23, a 1.5%
rise on 2021–22. This follows stronger export volumes for refined copper
products, helping to offset lower prices over the period (Figure 12.6).
Over the outlook period, export volumes are set to rise further, to reacharound 928,000 tonnes in 2024–25. The gains in export volumes are
expected to contribute to export earnings of around $12.5 billion in 2023–
24 and $12.8 billion in 2024–25.
Production to continue to grow over the outlook period

1,200

16

900

12

600

8

300

4

0

2018–192020–212022–23

VolumesValues (rhs)2024–25

A$ billion

Expected global surplus to contain copper price gains

Figure 12.6: Australia’s copper export volumes and values

Metal content, thousand tonnes

An upside risk to prices remains the historically low levels of inventories
globally. Stronger-than-expected demand in coming quarters could be
expected to draw inventories further and possibly cause price spikes.
However, softer demand growth forecast for 2024 (relative to recent years)
should lead to some inventory replenishment over the outlook period.

0

Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department ofIndustry, Science and Resources (2023)

Australia’s refined copper production is also expected to grow by around
8.9% annually to 2024–25, to reach around 540,000 tonnes. BHP’s
acquisition of OZ Minerals in May this year is expected to significantly
increase refined copper output from the company’s South Australian
operations, now known as Copper South Australia.
Copper exploration very strong through 2023

Mined production in 2022–23 is estimated to have grown to821,000 tonnes — up 6.2% year-on-year. This included significant
increase in existing operations such as Olympic Dam (which delivered
record annual output in copper) and Cadia Valley, as well as fromemerging producers such as the Anthill mine in Queensland.

Copper exploration expenditure rose to $176 million in the June quarter
2023. This was around 30% higher than the comparable quarter in 2022,
and continues a general upward trend seen since 2016.

Mined production is expected to grow over the outlook period to reacharound 877,000 tonnes in 2024–25. These gains are largely due to fewer
COVID- and weather-related disruptions (due to the end of the La Niña
weather episode), as well as new production from a number of bothgreenfield and brownfield mid-tier producers.

Since the June Resources and Energy Quarterly, the forecast forAustralia’s copper export earnings in 2023–24 and 2024–25 remain largely
unchanged. Downward revisions to the forecast copper price over theoutlook period have been offset by downward revisions to the AUDUSD
exchange rate, and slightly stronger export volumes.

Resources and Energy Quarterly September 2023

Revisions to the outlook

129

Table 12.1: Copper outlook
Annual percentage change
World

Unit

2022

2023f

2024f

2025f

2023f

2024f

2025f

– minekt

21,58622,17323,91425,062

2.7

7.9

4.8

– refined

kt

25,78627,097

27,341

27,478

5.1

0.9

0.5

Consumption

kt

25,842

26,56026,587

27,600

2.8

0.1

3.8

Closing stocks

kt

942

644

526

655

-32

-18

25

1.9

1.3

1.0

1.2

-33

-18

20

US$/t

8,815

8,524

8,279

8,995

-3.3

-2.9

8.7

USc/lb

400

387

376

408

-3.3

-2.9

8.7

US$/t

9,203

8,524

8,054

8,570

-7.4

-5.5

6.4

USc/lb

417

387

365

389

-7.4

-5.5

6.4

Australia

Unit

2021–22s

2022–23f

2023–24f

2024–25s

2022–23f

2023–24

2024–25f

Mine output

kt

773

821

847

877

6.2

3.2

3.5

Refined output

kt

362

457

553

542

26

21

-2.1

– ores and concsc

kt

1,641

1,525

1,164

1,313

-7.0

-24

13

– refined

kt

330

416

553

542

26

33

-2.1

– total metallic content

kt

808

855

899

928

5.9

5.1

3.2

– nominal

A$m

12,12812,304

12,47312,753

1.5

1.4

2.2

– realA$m

13,51012,807

12,473

12,351

-5.2

-2.6

-1.0

Production– weeks of consumption
Prices LME– nominal– realb

Exports

Export valuedNotes: b In 2023 calendar year US dollars; c Quantities refer to gross weight of all ores and concentrates; d In 2023–24 financial year Australian dollars; f Forecast.
Source: ABS (2023) International Trade, 5465.0; LME (2023) spot price; World Bureau of Metal Statistics (2023); Department of Industry, Science and Resources (2023).

Resources and Energy Quarterly September 2023

130

131

 Chinese demand drove stronger global nickel consumption in the firsthalf of 2023 despite a slower-than-expected economic recovery in China.
Rising global macroeconomic headwinds in the second half of the year
are expected to contain global growth in nickel consumption to around
3.2% in 2023.
 An oversupply in the global nickel market is expected to persist over theoutlook period, driven by growth in Indonesian (and some Chinese)mined and refined production. The existing oversupply in Class II nickel(primarily used for stainless steel) is also expected to spill over into thebattery grade nickel market over the outlook period.
 Weaker prices over the outlook period are expected to see Australia’s
nickel export earnings fall from $5.0 billion in 2022–23 to $4.3 billion in
2023–24. New production capacity in Australia is then expected to see a
rebound in forecast earnings to $4.5 billion in 2024–25.

13.2

World consumption

World nickel demand modestly stronger so far in 2023, all due to China
Refined nickel consumption in the first half of 2023 was 2.4% higher yearon-year (Figure 13.1). Despite declines in all other major markets, nickel
usage in China rebounded 12% year-on-year.
While China’s economic reopening remains weaker than expected so far
in 2023, Chinese nickel consumption has risen due to increased stainlesssteel production (up 6.8% year-on-year for the first six months of 2023)
and higher electric vehicle production (with sales up more than 30% overthe same period).
By contrast, other major producers such as Japan, South Korea andEurope have cut stainless steel production significantly through the year.
This reflects a progressive weakening in the global trade environment
through 2023, which has resulted in slowing manufacturing activity
amongst other major industrial economies and contractionary conditions in
key construction markets such as Europe.

Resources and Energy Quarterly September 2023

Figure 13.1: World nickel consumption
1.6

15%

1.4

10%

1.2

5%

1.0

0%

0.8

-5%

0.6

-10%

0.4

-15%

0.2

-20%

0.0

World

China

IDN

EU

First six months of 2023

Japan

US

ROW

Annual percentage growth

Summary

Million tonnes

13.1

-25%

Year-on-year growth (RHS)

Note: IDN ~ Indonesia; ROW ~ Rest of World
Source: International Nickel Study Group (INSG); Department of Industry, Science andResources (2023)

Global refined nickel consumption is forecast to grow to 3.5 million tonnes
by 2025, at an average annualised rate of 5.9% year-on-year. This growthin demand is expected to be driven by increasing stainless steel output
over the next few years. This in turn will be underpinned by the sizeable
infrastructure and non-residential construction planned for key growth
sectors such as Emerging Asia (see Steel chapter), as well as ongoingdevelopment of the industrial and manufacturing sectors in these
economies.
Electric vehicle demand to boost nickel consumption, despite LFP gains
The electric vehicle battery supply chain provides another critical — andrapidly growing — source of nickel demand. The IEA is projecting asignificant ramp up in EV production in the second half of the year, with
global EV sales projected to reach 14 million units for the full year 2023.
This represents growth of 35% year-on-year and would see EV’s accountfor close to 20% of sales across the full calendar year.

132

Over the rest of the outlook period, EV sales are expected to grow from11 million in 2022 to around 23 million in 2025. EV batteries are forecast to
account for around 20% of total refined nickel usage by 2025.
This forecast takes account of the emergence of non-nickel chemistries —such as lithium-iron phosphate (LFP) — in recent years. Between 2019and 2023 (year-to-May), LFP batteries have increased their market sharefrom 8% to 26%. This has primarily come at the expense of nickel cobalt
aluminium batteries (falling from 27% to 16%), with nickel manganesecobalt batteries maintaining around a 60% share of the overall market(Figure 13.2). See Battery Supply Chain chapter.
The trend of rising LFP battery deployment is expected to continue over
the outlook period, however the dramatic rise in aggregate EV production
should support continued healthy growth in nickel demand over that time.

13.3

World production

Figure 13.2: Electric vehicle battery installation, by type
100%
80%
60%
40%
20%
0%

2019

2020
LFP

2021
NCA

NMC

2022

2023*

Other

Note: Measured in GWh of installation; * Reflects first five months of 2023 only; LFP ~Lithium Iron Phosphate, NCA ~ Nickel-cobalt-aluminium, NMC ~ Nickel Manganese Cobalt,
Other includes lithium ion manganese oxide and nickel metal hydride battery

Global mined nickel production in the first half of 2023 was 13.4% higher
year-on-year (Figure 13.3). This was primarily due to new supply fromIndonesia — already the world’s largest producer — where mined output
grew by 26% over the period.

Figure 13.3: World mined nickel production

World mined nickel production is forecast to rise at an annualised rate of
5.8% to 2025 to reach 3.8 million tonnes. Indonesian output is expected to
grow from 1.6 million tonnes to more than 2.2 million tonnes over the same
period, and represent close to 60% of global output. Expansions areunderway at major operations including Sorowako, Weda Bay and Obi,
and greenfield projects such as PT Vale’s 80,000 tonnes per annum
Bahodopi mine are expected to come online in the next few years.
Indonesia also targeting downstream processing and EV battery sector
Indonesia’s substantial growth in mined output in recent years has helped
to drive a corresponding increase in the country’s production of nickel pig
iron (NPI), as well as intermediate products such as nickel matte andmixed hydroxide precipitate (MHP).

Resources and Energy Quarterly September 2023

1.8

35%

1.6

30%

1.4

25%

1.2

20%

1.0

15%

0.8

10%

0.6

5%

0.4

0%

0.2

-5%

0.0

World

IDN

PH

First six months of 2023

NC

RUS

AUS

ROW

-10%

Annual percentage growth

Source: Wood Mackenzie (2023); Department of Industry, Science and Resources (2023)

Million tonnes

Indonesia continues to see meteoric rise in mined nickel output in 2023

Year-on-year growth (RHS)

Note: IDN ~ Indonesia; PH ~ Philippines; NC ~ New Caledonia; RUS ~ Russia; ROW ~ Restof World
Source: International Nickel Study Group (2023); Department of Industry, Science andResources (2023)

133

1.6

30%

1.4

24%

1.2

18%

1.0

12%

0.8

6%

0.6

0%

0.4

-6%

0.2

-12%

0.0

RussiaROW

EUFirst six months of 2023

Year-on-year growth (RHS)

Note: ROW ~ Rest of World

Global refined production to grow 6% annually to 2025

13.4

Global refined nickel output is forecast to rise to 3.6 million tonnes in 2025.
China and Indonesia are expected to account for the vast majority of thisincrease, with each expected to add 400,000-500,000 tonnes of new
capacity in the next few years.

Benchmark nickel price continuing to trend lower through 2023

The substantial rise in China’s capacity over the outlook is expected toinclude a large number of Class I facilities, and added capability to
produce nickel sulphate (which can accept MHP as a feedstock). The
surge in Indonesian production is also expected to be spread acrossproduction such as NPI, MHP and matte. The rising adoption of High
Pressure Acid Leaching (HPAL) has created significant opportunities totransform the country’s vast laterite-based ores into battery grade
feedstock. However, managing the complexities of this treatment, as wellas the significant environmental impacts, will remain an ongoing challenge
for the industry.
Resources and Energy Quarterly September 2023

-18%

World Indonesia China

The Indonesian Government oversaw the establishment of the Indonesia
Battery Corporation (IBC) in March 2021, and set both ambitious targets
for domestic EV production (600,000 cars by 2030) and stringent
regulations on the share of BEVs required to have local content (40%currently, 80% after 2026).

Annual percentage growth

The substantial ramp up of intermediate (and refined) nickel production
follows the Indonesian government’s 2020 ban of nickel ore exports, andfits with the nation’s broader goals to develop both downstream processing
and a domestic EV battery sector in coming years. While the Indonesian
government is yet to introduce export restrictions on intermediate nickel
products (such as NPI) in 2023, it recently ceased issuing new licenses for
NPI smelters, and removed tax incentives for lower quality products.

Figure 13.4: World refined nickel production

Million tonnes

Collectively, Indonesia’s output of intermediate products (such as matteand MHP) is estimated to have grown by more than 50% year-on-year so
far in 2023. Importantly, these products offer alternative upstream sources
for battery-grade nickel for major consumers such as Indonesia and China,
and are expected to improve current issues regarding tight supplies in theClass I nickel market.

Source: International Nickel Study Group (2023); Department of Industry, Science andResources (2023)

PricesAfter a peak above US$30,000 a tonne in January, the benchmark London
Metal Exchange (LME) nickel has declined throughout 2023, averaging
around US$20,400 a tonne in the month of August. The fall in prices
reflects an increasingly challenging global macroeconomic environment in
the second half of the year, as well as specific structural changes
underway in the global nickel market.
The global macroeconomic environment has been affected by a weakerthan-expected recovery in China, a key driver of waning prices for manybase metals in recent months. Despite a rebound earlier in the year,
China’s manufacturing activity has continued to soften, falling to growth ofjust 2.5% (year-on-year) in July. This fall has been propelled by a sluggish
recovery in domestic consumption and a slowdown in China’s global trade.

134

With significant growth in mined and refined supply projected over theoutlook period, a slackening in demand from key global sectors — such as
manufacturing and construction — carries significant downside risks toprices over the next few years.
Structural changes underway in nickel market set to drive prices lower
An oversupply in the global nickel market — which led to 18 months ofheavy discounts for Class II nickel products (nickel pig iron, or NPI andferronickel) — now looks set to carry over into class I ‘battery grade’
products.
A growing supply of intermediate products such as nickel matte and mixedhydroxide precipitate (or MHP) — particularly from the world’s largest
primary nickel producer Indonesia — offers viable alternatives to Class I
products for major nickel refiners. This is expected to lead to a significant
boost in battery-grade nickel supply over the next few years, particularly
for key importers such as China. The projected increase in nickel refining
capacity in China and Indonesia could therefore be set to drive the global
nickel market into surplus in 2023 and further out over the outlook period.
Low inventories one impediment to global surplus in 2023 and 2024
While healthy growth in mined and refined nickel supply is expected tocreate moderate oversupply to 2024, the low levels of inventories seen at
major exchanges such as LME and Shanghai Futures Exchange remain a
key upside risk to prices in the near term.

Resources and Energy Quarterly September 2023

600

60,000500

50,000400

40,000300

30,000200

20,000100

10,00002016 2017 2018 2019 2020 2021 2022 2023
LME stocks

SHFE stocks

US$ a tonne

The outlook for construction and manufacturing is also deteriorating inseveral other key markets. Industrial production in regions such as
Advanced Asia and Europe has registered significant year-on-year falls inrecent months. Lead indicators such as manufacturing Purchasing
Managers’ Indices (PMI) suggest a further near-term contraction in activity
for these regions (and the United States).

Figure 13.5 Nickel spot price and stock at exchanges

Stocks (thousand tonnes)

China’s construction sector also continues to face a gloomy near-term
outlook, with commercial and residential new starts registering significant
year-on-year falls in July (see Macroeconomic Outlook chapter).

0

LME nickel cash (rhs)

Source: Bloomberg (2023); Department of Industry, Science and Resources (2023)

Inventories at LME remain around 40,000 tonnes as of August 2023,
below even 2020 COVID levels. While this is consistent with the broader
trend of dwindling exchange inventories for a number of key metals, thefall in nickel stocks also reflects the reduced trading volumes on the LME
following the 2021 LME nickel trading crisis (where prices breached
US$45,000 a tonne and trading was suspended). SHFE inventories also
remain at historically low levels (Figure 13.5).
The LME nickel price is forecast to average about US$22,000 a tonne in
2023. A near-term global surplus is forecast to see prices fall further — toaround US$20,200 a tonne in 2024 — before a tighter global balance of
supply and demand should see prices recover to around US$21,500 by
2025.

135

Falling prices to see moderately lower export earnings over outlook period
Decade-high nickel prices through 2022 and early 2023 helped push nickel
export earnings to a record level of $5.0 billion in 2022–23 (Figure 13.6).
Stronger production and export volumes are expected over the outlook
period, though this is initially expected to be more than outweighed byfalling prices. Export earnings are expected to fall to $4.3 billion in 2023–
24 before increasing to $4.5 billion 2024–25. Export volumes are forecast
to rise from 161,000 tonnes in 2022–23 to 174,000 in 2023–24 (8.2%
growth) and 192,000 in 2024–25 (11% growth).
Australian production volumes to grow strongly to 2024–25
After flat growth in 2022–23, Australian mined nickel production is forecast
to grow to 163,000 tonnes in 2023–24 and 187,000 tonnes in 2024–25.
Contributing to this increase in mined production will be IGO’s Cosmos
project, further ramp ups at Kambalda (Mincor) and Avebury (Mallee
Resources), as well as the reopened Ravensthorpe mine.
BHP has also advised that its new 35,000 tonne per annum West
Musgrave nickel project in Western Australia (following its acquisition of
OZ Minerals in May this year) is in early stages of execution after a final
investment decision was made in September 2022 (made by OZL prior to
BHP’s acquisition).
Australian refined nickel production (including refined and intermediate
products) is expected to grow over the outlook period, from 135,000
tonnes in 2022–23 to 147,000 tonnes in 2024–25. This is expected to beunderpinned by growing output from BHP’s Nickel West operation.

Revisions to the outlook
Compared to the June 2023 Resources and Energy Quarterly, nickel
export earnings have been revised down by $0.1 billion in 2023–24; andup $0.4 billion in 2024–25. This follows small revisions to projected prices
in 2023–24, and upward revisions to refined nickel production over theoutlook period.
Figure 13.6: Nickel export volumes and values
240

6

160

4

80

2

0

2020–212021–222022–23

Export volumes

2023–24

2024–25

A$ billion

Australia

Thousand tonnes

13.5

0

Export values (rhs)

Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department ofIndustry, Science and Resources (2023)

Exploration expenditure hits decade highs
Nickel and cobalt exploration expenditure for the June quarter 2023 wasaround $84 million. This was 6.7% higher than the comparable period in
2022. Further, exploration in the 12 months to June 2023 was$332 million, the highest since 2008, and demonstrating nickel’s growing
importance in the global energy transition.

Resources and Energy Quarterly September 2023

136

Table 13.1: Nickel outlook
Annual percentage change
Unit

2022

2023

2024f

2025f

2023s

2024f

2025f

– mine

kt

3,204

3,492

3,698

3,789

9.0

5.9

2.4

– refined

kt

3,059

3,313

3,519

3,645

8.3

6.2

3.6

Consumption

kt

2,956

3,051

3,367

3,507

3.2

10

4.2

Closing stocks

kt

694

956

1 107

1 245

38

15.8

12.5

12.2

16.3

17.1

18.5

33

5.0

8.0

US$/t

25,69621,98520,20021,525

-14

-8.1

6.6

USc/lb

1 166

997

916

976

-14

-8.1

6.6

US$/t

26,82721,985

19,65020,508

-18

-11

4.4

USc/lb

1 217

997

891

930

-18

-11

4.4

Unit

2021–22f

2022–23f

2023–24f

2024–25

2022–23f

2023–24

2024–25f

World
Production– weeks of consumption
Prices LME– nominal– realbAustralia
Production– mine c

kt

154

152

163

187

-1.4

7.5

14

– refined

kt

98

97

101

104

-1.7

4.2

3.6

31

38

41

43

20

8.5

5.5

kt

155

161

174

192

3.3

8.2

11

– nominal value

A$m

4,405

4,956

4,279

4,541

13

-14

6.1

– real value e

A$m

4,907

5,158

4,279

4,398

5.1

-17

2.8

– intermediate
Export volume

dg

Export valueg

Notes: b In 2023 calendar year US dollars; c Nickel content of domestic mine production; d Includes metal content of ores and concentrates, intermediate products and nickel metal; e In 2023–24
financial year Australian dollars; f Forecast; g OCE estimates based on publicly available data.
Source: ABS (2023) International Trade, 5465.0; LME (2023) spot price; International Nickel Study Group (2023); Company reports; Department of Industry, Science and Resources (2023).

Resources and Energy Quarterly September 2023

137

138

139

Summary The zinc price has declined noticeably in the September quarter as
Chinese demand disappointed expectations. China’s ongoing property
crisis has weakened the prospects for demand over the outlook period,
with the price forecast to average US$2,600 a tonne in 2025.
 Australia’s zinc production is forecast to rise over the outlook period.
The closure of several small mines over the June quarter will be offset
by an expansion of the Century mine and a recovery in production atexisting mines impacted by COVID disruptions.
 Australia’s zinc exports are forecast to fall to $3.6-3.7 billion in 2023-24
and 2024-25, with higher volumes partially offsetting lower prices.

14.2

World consumption

Global zinc consumption remains weak as China’s property crisis deepens
Zinc consumption tends to follow the global industrial production cycle,
given its primary role in galvanising steel (Figure 14.1), and its heavy use
in the construction and automotive sectors. Between June quarter 2021
and June quarter 2023, world demand fell at an annualised average rate of
4.1%. Year-on-year, demand rose 1.5%, impacted by the effects ofChina’s pandemic restrictions in June quarter 2022.
China is the world’s largest consumer of zinc. Between June quarter 2021
and June quarter 2023, Chinese demand fell at an annualised averagerate of 5.1%. (Year-on-year, demand rose 7.5% to June 2023, impacted by
the effects of pandemic restrictions in June quarter 2022.) The two-year
annualised fall contrasts with an annual average growth of 4.0% between
2009 and 2019. The fall was driven by China’s property market, which
weakened further in the June quarter 2023, as residential building sales
fell by 20% year-on-year.
Chinese zinc demand is being supported by a strong recovery of Chinese
vehicle production. Between the June quarter 2021 and June quarter
2023, China’s passenger vehicle production rose at an annualised
average rate of 11%. The rise was driven by the emergence of China as a

Resources and Energy Quarterly September 2023

Figure 14.1: Zinc consumption vs industrial and steel production
20
Annual percentage change

14.1

15
10
5
0
-5
-10

2013

2015

2017
2019
2021
2023
world zinc consumption growth
world industrial production growth
World steel production

2025

Source: International Lead Zinc Study Group (2023); CPB Netherlands Bureau for Economic
Policy Analysis (2023); World Steel Association (2023); Department of Industry, Science andResources (2023).

leading manufacturer of electrical vehicles, which are often less expensive
than comparable models from international competitors. In 2022, China
overtook Japan as the world’s largest exporter of passenger motor
vehicles.
Other major passenger vehicle producers also posted production
increases as chip shortages eased. In the June quarter 2023, passenger
vehicle production in Germany rose by 27% year-on-year, while productionin Japan rose 30% year-on-year.
World zinc consumption is forecast to grow on average 0.6% per year over
the outlook period, much slower than the pre-pandemic period when,between 2009 and 2019, zinc consumption grew by an average of 2.4%
per year. China housing market faces structural decline, with a weak
demand outlook and over-investment (see Macroeconomic Outlook
chapter, Box 2.1). Growing electric vehicle adoption is also weakening

140

Demand will be supported in the longer term by the global energy
transition. Globally, the rollout of renewable energy infrastructure is
expected to support demand for zinc, due to its role as a key input to windturbines, solar panels and transmission towers.

14.3

World production

4.1% year-on-year in the June quarter 2023. Refined zinc production in theEuropean Union (EU) declined 5.4% year-on-year but rose 8.6% over thequarter, with the Auby smelter reopening in March.
Over the outlook period, refined production from primary and secondary
sources is expected to rise by 1.2% a year on average. Most of the newcapacity is expected to be in China.
Figure 14.3: World zinc mine production, metallic content

Between June quarter 2021 and June quarter 2023, world mine production
fell by an annualised average of rate of 2.3%. Year-on-year, productionrose 0.9% in the June quarter 2023, impacted by the effects of China’s
pandemic restrictions in June quarter 2022. China makes up about a thirdof global zinc mine production, and between June quarter 2021 and Junequarter 2023, China’s mine production fell at an annualised average rateof 3.2%. Year-on-year, production rose 1.4% in the June quarter 2023.
The sharp fall in zinc prices has led to the closure of a number of zincmines. Australian production fell 8.3% year-on-year in the June quarter
2023. The unlisted Australian mining company Aurora Metals entered into
administration in July, resulting in the closure of Mount Garnet and KingVol mines in Australia. European production fell 9.0% in the same period,
with Tara mine in Ireland, the largest European zinc mine, closing in June.
Over the outlook period, world mine output is forecast to average annual
growth of 0.5% (Figure 14.3). The zinc concentrate market is in surplus,
while the demand outlook for zinc is expected to weaken. This suggests
prices could remain low until high-cost capacity is shut. China, Mexico, theDemocratic Republic of Congo and Russia are expected to add capacity
over the outlook period, which could result in further oversupply.
Supply constraints from limited smelter capacity easing
World refining capacity rose 4.2% year-on-year in the June quarter 2023
as European smelters reopen and China moves away from pandemic
lockdowns. Output in China — the largest zinc refiner globally — rose by

Resources and Energy Quarterly September 2023

Million tonnes

Global mine production falls as low prices trigger mine closures

16

8

12

4

8

0

4

-4

0

2013

2015
2017
Mine production

2019

2021
2023
2025
Mine production change (rhs)Annual percentage changedemand for zinc, as automakers prefer lighter materials to steel (inparticular aluminium) to offset the weight of battery packs.

-8

Source: International Lead Zinc Study Group (2023); Department of Industry, Science andResources (2023).

14.4

PricesPrices weaken on growing concerns over the demand outlook
The London Metal Exchange (LME) zinc spot price stabilised in the Junequarter 2023 at around US$2,500 a tonne. Prices declined from anaverage of about US$3,100 a tonne in the previous three quarters, when
worries over shortages of zinc refining capacity kept prices high.
The price falls were triggered by the reopening of some European zincsmelters. However, the fall in price has been sustained by the underlying
weakness in demand, as China’s reopening from COVID lockdowns has
failed to deliver the widely expected recovery in demand.

141

LME stocks at the end of the March quarter were 45 thousand tonnes,
which is relatively low in historical terms. However, stockpiles rose rapidly
over the June quarter to reach 81 thousand tonnes, then jumped to 147
thousand tonnes in the second half of August. The rapid increase in stocklevels suggests the zinc market has moved into surplus and/or some metal
has moved back on warrant.
Zinc treatment costs have fallen as global smelting capacity has risen at atime of falling demand. Some European smelting capacity has re-opened
as the cost of energy falls back. Spot treatment costs of imported
concentrates in China fell from an average of $263 per tonne in the March
quarter 2023 to $195 per tonne by July 2023.
The LME zinc spot price is forecast to average about US$2,700 a tonne in
2023. Prices are forecast to fall to average US$2,500 in 2024 andUS$2,600 in 2025, with zinc demand growth expected to remain weakover the outlook period (Figure 14.4).
4,000

12

3,000

9

2,000

6

1,000

3

0
2013

2015

2017
Price

2019

2021

2023

2025

Weeks of consumption

US$ a tonne

Figure 14.4: Zinc prices and stocks0

Stocks (rhs)

Source: LME (2023); International Lead Zinc Study Group (2023); Department of Industry,
Science and Resources (2023).

Resources and Energy Quarterly September 2023

14.5

Australia’s exports and production

Export earnings to fall as price declines outweigh growing domestic output
Australia’s export earnings for both zinc concentrates and refined zinc
(combined) fell 14% year-on-year to $980 million in the June quarter 2023.
The fall in the zinc price drove this result: in Australian dollar terms, zincprices fell 31% year-on-year. Export volumes, in metal content terms, rose
1.2% year-on-year.
The impact of the fall in zinc prices on export values was partially offset by
the high proportion of refined zinc — rather than ores — exported.
Australian production of refined zinc rose 23% year-on-year in the Junequarter 2023. The Townsville refinery completed an expansion project in
the March quarter 2023 and is now operating at a higher capacity. Delays
with commissioning the expansion project disrupted production in 2022.
Australian mine output fell 8.3% year-on-year in the June quarter 2023.
Output rose 15% quarter-on-quarter: heavy rain disrupted mine operationsin the March quarter 2023. The unlisted company Aurora Metals enteredinto administration in the June quarter, and two zinc mines owned by thecompany have closed as a result. Additionally, the Hera mine, owed by
Aurelia metals, closed at the end of March 2023. The decision to close theHera mine early was made in December 2022 due to low profitability.
From $4.3 billion in 2022–23, Australia’s export earnings for concentrates
and refined zinc (combined) are forecast to fall to $3.6 and $3.7 billion in
2023–24 and 2024–25, respectively. Higher production volumes will
partially offset the impact of lower forecast prices (Figure 14.5). Growth inAustralian mine output is expected to average 4.4% per year over theoutlook period. Output growth over the next two years will be driven by the
expansion of the Century mine.
Exploration expenditure softens in the March quarter
Exploration expenditure for silver, lead and zinc fell 8.8% year-on-year in
the June quarter 2023. Exploration expenditure slumped in 2020 — due tothe COVID pandemic — but recovered as zinc prices rose over 2021 and1422022. Exploration expenditure is moderating with zinc prices returning to alower level.

1,800

6

1,500

5

1,200

4

900

3

600

2

300

1

0

2014–15 2016–17 2018–19 2020–21 2022–23 2024–25
VolumesValues (rhs)

A$ billion

Thousand tonnes

Figure 14.5: Australia’s zinc exports, metallic content

0

Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department ofIndustry, Science and Resources (2023).

Revisions to the outlook
Compared to the June 2023 Resources and Energy Quarterly, export
earnings for 2023–24 and 2024–25 have been revised down by 15% and
12% respectively. The zinc price forecast has been revised down due tothe weaker global demand outlook, and export volumes had been revised
down due to mine closures in Australia.

Resources and Energy Quarterly September 2023

143

Table 14.1: Zinc outlook
Annual percentage change
World

Unit

2022

2023

2024 f

2025 f

2023 f

2024 f

2025 fkt

12,476

12,57912,555

12,681

0.8

-0.2

1.0

kt

13,342

13,687

13,684

13,824

2.6

0.0

1.0

Consumption

kt

13,506

13,557

13,65013,758

0.4

0.7

0.8

Closing stocks

kt

630

760

794

860

20.5

4.5

8.3

2.4

2.9

3.0

3.3

20.1

3.79

7.5

US$/t

3,485

2,651

2,536

2,630

-23.9

-4.3

3.7

USc/lb

158

120

115

119

-23.9

-4.3

3.7

US$/t

3,638

2,651

2,467

2,506

-27.1

-6.9

1.6

USc/lb

165

120

112

114

-27.1

-6.9

1.6

Production– mine– refineda– weeks of consumptionPrice– nominal– realbAustralia

Unit

2021–222022–23

2023–24 f

2024–25 f

2022–23

2023–24 f

2024–25 f

Mine output

kt

1,257

1,168

1,212

1,273

-7.1

3.8

5.0

Refined output

kt

435

410

453

505

-5.8

10.4

11.6

– ore and concentrate c

kt

2,033

1,886

1,949

1,966

-7.2

3.4

0.9

– refined

kt

313

389

419

471

24.3

7.6

12.5

– total metallic content

kt

1,220

1,248

1,298

1,358

2.3

3.9

4.6

– nominal

A$m

4,506

4,330

3,627

3,746

-3.9

-17.8

2.7

– real d

A$m

5,020

4,507

3,627

3,628

-10.2

-21.0

-0.5

Export volume

Export value

Notes: a Includes secondary refined zinc; b In 2023 US dollars; c Quantities refer to the gross weight of all ores and concentrates; d In 2023–24 Australian dollars; f Forecast; s Estimated.
Source: ABS (2023) International Trade in Goods and Services, Australia, Cat. No. 5368.0; Company reports; Department of Industry, Science and Resources (2023); International Lead Zinc Study
Group (2023); Wood Mackenzie (2023); LME (2023).

Resources and Energy Quarterly September 2023

144

145







Summary

Record Australian lithium exports ($20 billion in 2022–23) are forecast
to decrease over the outlook period, as lower prices offset higher export
volumes ($16 billion in 2024–25). Prices are expected to fall due to thelithium market entering a sustained period of surplus supply, but remain
well above levels prior to 2021.
Australian lithium mine production continues growing due to expansions
and new mines. Australia accounts for half of global lithium extraction
and rising production meets growing global battery demand for lithium.
Australia is developing capacity to refine lithium domestically, with threelithium hydroxide refineries (operating or under construction) and a
newly announced lithium phosphate refinery. This contributes to thediversifying global lithium refining and developing Australia’s battery
value chain.

15.2

Other major economies including the United States and European Union
have substantially increased support for EVs in recent years. These
economies are targeting higher EV uptake in line with emissions reduction
targets, as well as the development of domestic EV supply chains. In the
short term, EV manufacturing in these economies is expected to remaincomparatively low as production ramps up, with world growth continuing tobe driven by Chinese EV manufacturing production. Global EV sales areprojected to more than double between 2022 and 2025 (11 million to
23 million cars per annum) (see Figure 15.2).
Since the June REQ, the application of improved battery chemistries haveseen EV driving ranges rising and “refuelling” times declining towards
levels comparable with internal combustion engines. So far, lithium
remains a central element in these improved battery chemistries.

Figure 15.1: World lithium consumption, by demand source

World demand

Global lithium consumption maintains high growth outlook
World lithium consumption is expected to maintain a high growthtrajectory, due to battery demand for the energy transition alongside thegrowth outlook for China’s Li-ion battery manufacturing. In lithium
carbonate equivalent (LCE) terms, global lithium consumption is forecast
to increase from 797 thousand tonnes (kt) to 1,428 kt over the outlook
period (from 2022 to 2025) (Figure 15.1).
Policy support underpins growth in global electric vehicle sales
The outlook for electric vehicle (EV) demand (60% of global lithium
consumption in 2022) remains very favourable due to high policy support
that continues to be directed to the sector, particularly in China. The
resilience of China’s EV sector is underpinned by almost 20 years ofindustrial support, through consumer subsidies as well as producer tax
breaks and finance. Notably, China is now the world’s largest automobile
exporter (due to the success of the EV sector), surpassing Japan andGermany (in terms of first half 2023 exports).

Resources and Energy Quarterly September 2023

1600
thousand tonnes LCE

15.1

1400
1200
1000
800
600
400
200
0

2020

EV battery

2021
ESS battery

2022

2023

Other battery

2024

2025

Other (industrial)

Source: Department of Industry, Science and Resources (2023), Wood Mackenzie (2023)

Energy transition drives investment in utility-scale energy storage systems
Growing lithium demand also reflects government efforts to enable theenergy transition and increase investment in utility-scale energy storage
systems (ESS). The International Energy Agency (IEA) estimate global146

investment in ESS to have more than doubled (year-on-year) in 2022. ESS
demand for lithium is expected to more than double between 2022 and2025, driven by major economies including China, the EU, and the US.

Figure 15.2: Global electric vehicles sales
25

Global lithium extraction growing rapidly in the short term
Increased extraction of lithium resources reflects higher production acrossall major producer nations, as well as the emergence of a number of new,smaller producers (Figure 15.3). Higher production is partly in response tolithium prices recovering in 2021 and surpassing record levels in 2022.

15

Figure 15.3: Global lithium extraction by country

10

1800
1600

5

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
China

EuropeUnited States

Other

Note: Electric vehicles are defined to be battery electric vehicles and plug-in hybrid electricvehicles.
Source: Wood Mackenzie (2023)

Increasing electrification to grow other sources of battery demand
Other sources of battery demand for lithium are expected to grow due tothe electrification of tools and products (such as electric scooters),
alongside growth in portable electronics. Other battery demand is
expected to increase by 47% between 2022 and 2025.

thousand tonnes LCE

million units

World production

Australia continues to lead global lithium extraction, accounting for 51% of
global output in 2022). Spodumene production is also forecast to increase
from 388 to 632 kt LCE in the 2022–25 period (see Australia section).

20

0

15.3

1400
1200
1000
800
600
400
200
0
Australia

2020
Chile

2021

2022

2023

2024

2025

China

Argentina

CanadaZimbabwe

Other

Notes: Global lithium extraction differs from the measure of world lithium production in thisreport. Lithium production is defined to reflect refined production of lithium chemicals such aslithium hydroxide and lithium carbonate. In contrast, lithium extraction includes lithium
resources extracted from brines or mines.

Industrial demand for lithium maintains stable growth

Source: Department of Industry, Science and Resources (2023), Wood Mackenzie (2023)

The use of lithium is also underpinned by stable growth in areas ofindustrial demand that are well established, including ceramics, glassceramics, and greases. Industrial demand for lithium is expected to growby 2-3% per annum, in line with historical growth trends.

Amongst other major producers, Chile is expected to see further growth inlithium extraction (from brine sources) over the outlook period. Chile’s
lithium extraction is forecast to increase from 160 kt to 227 kt LCE over the2022–25 period. China is also forecast to increase lithium extraction (frombrine and mine sources) from 156 kt LCE in 2022 to 291 kt LCE by 2025.

Resources and Energy Quarterly September 2023

147

Among other countries, Argentina, Canada and Zimbabwe are expected tosignificantly increase lithium extraction, and account for a combined 19%
share of global extraction by 2025 (from 5.1% in 2022).

Figure 15.4: Share of global lithium refining

Lithium in Argentina and Chile is extracted from brine sources and must beprocessed domestically into refined lithium. As a result, the combined
share of global refining in these countries will remain largely unchanged(24% by 2025), in line with domestic lithium extraction.
By 2025, investments to develop lithium refining in Australia and the US
are expected to lead to market shares of 6.0% and 1.2% respectively.
Recycling is expected to make up 2–3% of lithium supply from 2022 to
2025.

100%
90%
80%
70%
60%

15.4

50%

Lithium prices to decrease as market enters a period of surplus production

40%

Lithium prices have followed a variable trajectory over recent years due tosharp short-term supply and demand imbalances.

20%
10%
2020
China
United States

2021
2022
2023
Chile
Argentina
Other countries Recycling

2024
2025
Australia

During 2019 and 2020, lithium prices were low due to surplus production,
leading several mine operations to become insolvent or being placed
under care and maintenance.

Figure 15.5: Average monthly lithium spot prices
784

Source: Department of Industry, Science and Resources (2023), Wood Mackenzie (2023)

6

72

5

60

4

48

3

36

2

24

1

12

Global lithium refining capacity to expand and diversify over outlook
Global lithium refining currently remains highly geographicallyconcentrated. In 2022, China, Chile and Argentina made up 96% of global
lithium refining. By 2025, this is expected to decrease to 87% as lithiumrefining capacity ramps up in other countries such as Australia and the US.
China is expected to broadly maintain around 60% of global refining
capacity to 2025, due to further investments in domestic refining. China’s
high share of global refining is enabled by imports of lithium ore extracted
from Australia, the leading global source of lithium extraction. As Australia
ramps up domestic lithium refining, this will increase Australia's share of
global lithium refining.

'000 US$ per tonne

Note: This figure reflects the production of global refined lithium, not lithium refining capacity.

0
Jan-18Jan-19Jan-20Spodumene China (LHS)

Jan-21

Jan-22

Jan-23'000 US$ per tonne

30%

0%

Prices0

Lithium hydroxide China (RHS)

Notes: The spodumene price is CIF (cost including freight), with an average grade of 5-6%.
The lithium hydroxide price is FOB (free on board). Price series are smoothed.
Source: Bloomberg (2023)

Resources and Energy Quarterly September 2023

148

In 2022, spot prices for spodumene (concentrated ore) averaged
US$4,364 per tonne, well above the average level of US$663 per tonne
over the 3 years to 2021 (Figure 15.6). The spot price of lithium hydroxide(a refined lithium product) averaged US$67,279 per tonne in 2022,
dramatically higher than the average price of US$13,656 per tonne overthe 3 years to 2021.
In 2023, prices have fallen significantly as the market swings from deficit tobeing in balance. The high prices in 2021 and 2022 incentivised moreinvestment in lithium production, resulting in global supply catching up to
demand. The high prices of the period also drove companies to destock to
reduce the cost of carrying inventory — putting further downward pressure
on prices.
Prices are forecast to fall further by 2025 as the lithium market enters aperiod of surplus supply, and is expected to result in rising stockpiles.
However, prices are expected to remain well above levels traded in the
few years prior to 2021.
The average spot price of spodumene is forecast to be around US$4,190
per tonne in 2023, then decline to around US$2,090 per tonne by 2025.
The spot price of lithium hydroxide is forecast to be US$58,225 in 2023,
then decline to around US$37,290 per tonne in 2025.
There are likely to be an increased number of price benchmarks fordelivery to destinations in Western countries as the bifurcation of lithium
markets and supply chains continues: the US and other countries are
steadily building supply chains that are less reliant on China — wheremost lithium is currently refined.

15.5

Australia

Lithium mines expected to continue to increase production over outlook
Australia leads global lithium extraction, and mine production is forecast tocontinue growing. Mine production of spodumene is forecast to rise to 3.3
million tonnes (Mt) in 2023–24 and 4.0 Mt in 2024–25, up from to 3.1 Mt in
2022–23. Rising mine production will be driven by the expansion ofexisting mines, including Greenbushes, Finniss, Wodgina, Pilgangoora, Mt
Marion and Mt Cattlin. Greenfield production is also due to commence at
Mt Holland and Kathleen Valley over the outlook period.
Despite recent price falls, Australian lithium mines are expected to remain
highly profitable over the outlook period, with long term prices projected tosettle well above reported production costs. For the 2022–23 financial
year, Greenbushes, Mt Cattlin, Mt Marion, Pilgangoora, and Wodgina
reported the unit cash costs as a share of prices received was 9.5%, 19%,
37%, 25% and 19% respectively (Figure 15.6).

Figure 15.6: Company reported spodumene price received andcost of production, select mines, 2022–23
87'000 A$ per tonne

Prices recovered in 2021 and then rose dramatically in 2022 as rapidly
growing global demand outpaced supply, leading to a run down ininventories. As the market deficit intensified, lithium consumers increased
their inventories to ensure sufficient supplies for continued production andmeet downstream contract obligations, placing further upward pressure on
prices.

6
5
4
3
2
1
0

Greenbushes Mt Cattlin
Price received

Mt Marion Pilgangoora
Cash cost of production

Wodgina

Notes: Differences in prices received is partly due to differences in the grade of spodumene.
For Greenbushes, price received calculated by dividing sales revenue (FOB) by quantity of
spodumene concentrate sold.
Sources: Allkem (2023), IGO (2023), Mineral Resources (2023), Pilbara Minerals (2023)

Resources and Energy Quarterly September 2023

149

Australia ramping up refining of lithium hydroxide, developing lithium
phosphate refining
Australia is continuing to develop downstream lithium refining capacity
domestically, including a number of lithium hydroxide refineries andannounced investments in emerging products such as lithium phosphate.
Lithium phosphate can be refined into lithium hydroxide. By 2024–25,
Australian lithium hydroxide output is forecast to reach 89 kt, implying that
15% of Australian spodumene will be refined domestically (Figure 15.7).
There are currently three lithium hydroxide refineries either operating or
under development (two based in Kwinana and one in Kemerton),alongside one announced lithium phosphate refinery in Pilgangoora.
The first Kwinana refinery is owned by Tianqi Lithium Corporation (51%)
and IGO (49%). After facing technical challenges in the June quarter 2023,
the facility is now undergoing major work to fix production bottlenecks. The
refinery is still ramping up and was reported to be operating at around 20%
of nameplate capacity as at the end of July (target 48 kt).

5

100

4

80

3

60

2

40

1

20

0

2015-162018-19
Spodumene (LHS)

2021-222024-25
Lithium hydroxide (RHS)

thousand tonnes

million tonnes

Figure 15.7: Australian production of lithium ore (spodumene)
and refined lithium (lithium hydroxide)0

The second Kwinana refinery is under construction and owned by
Wesfarmers (50%) and SQM (50%). First production is expected in 2024
and capacity is targeted to be 50 kt.
The Kemerton lithium hydroxide refinery is reported to be operating, also
proposed to undergo change in ownership structure to be 100% owned by
Albemarle (currently 60% Albemarle and 40% Mineral Resources).
Capacity is targeted to be 100 kt.
Pilbara Minerals and Calix Limited recently announced final investment
decision (FID) on construction of a lithium phosphate refinery at
Pilgangoora. This plant will use a patented electric kiln technology that can
reduce emission intensity if powered by renewable energy (up to 80%
reduction compared to conventional coal/gas kiln). This facility is only
expected to produce over 3 kt of lithium phosphate at full capacity, todemonstrate the viability of this type of low emissions refining technology.
Record lithium export earnings to decrease as prices decline
The value of lithium exports is estimated to have reached $20.3 billion in
2022–23, a significant increase from the previous record of $5.0 billion in
2021–22 (Figure 15.8). The increase was driven by a near-tripling in prices
over the period, as well as volumes of spodumene exports increasing by
46%. In 2022–23, 98% of spodumene by volume was exported to China.,
with the remainder exported to countries such as Belgium (1.2%), South
Korea (0.5%), and the United States (0.1%).
The value of lithium exports is forecast to decline to $17.9 billion in
2023–24, and $16.2 billion in 2024–25. The declines will be driven bymoderating prices over the period, though prices are expected to remain
significantly higher than pre-2021 levels. In terms of volumes, spodumene
exports are expected to grow at a comparatively slower pace than recent
years, which will reflect an increasing share of domestic refining to
produce lithium hydroxide.

Source: Department of Industry, Science and Resources (2023), Wood Mackenzie (2023)

Resources and Energy Quarterly September 2023

150

Figure 15.8: Value of Australian lithium exports
25

A$ billion

20
15
10
5
0

2015-16
Spodumene

2018-19
Lithium hydroxide2021-222024-25

Other lithium products

Note: Before January 2021, ABS spodumene exports data was subject to confidentiality.
Data prior to this date is sourced from WA Department of Mines, Industry Regulation and
Safety.
Source: ABS (2023), Department of Industry, Science and Resources (2023), WA
Department of Mines, Industry Regulation and Safety (2022).

Revisions to the outlook
Since the June 2023 Resources and Energy Quarterly, the forecast forAustralian lithium export earnings has been revised upward by 4% in
2022–23, unchanged in 2023–24 and upward by 8.9% in 2024–25. The
upward revision in 2024–25 is due to a change in data source for thelithium hydroxide price (for improved consistency with other reported priceestimates).

Resources and Energy Quarterly September 2023

151

Table 15.1: Lithium outlook
Annual percentage change
World

Unit

2022

2023f

2024f

2025f

2023f

2024f

2025f

Production a b

kt

737

981

1 259

1 511

33.1

28.4

20.0

Demand a

kt

797

999

1,217

1,428

25.4

21.8

17.4

– nominal

US$/t

4 364

4 194

2 567

2 092

-3.9

-38.8

-18.5

– real c

US$/t

4,556

4,194

2,497

1,993

-8.0

-40.5

-20.2

– nominal

US$/t

67,27958,22542,29237,292

-13.5

-27.4

-11.8

– real c

US$/t

70,24058,225

41,14035,530

-17.1

-29.3

-13.6

Australia

Unit

2021–222022–23s

2023–24f

2024–25f

2022–23s

2023–24f

2024–25f

kt

2 130

3 085

3 316

4 031

44.8

7.5

21.5

– Ore and concentrate (spodumene) d

kt

2 248

3 292

2 942

3 432

46.4

-10.6

16.7

– Refined (lithium hydroxide)

kt

0

0

55

89

-100.0NA

60.0– Ore and concentrate (spodumene) d

A$m

4 899

20 17214 85812 153

311.7

-26.3

-18.2

– Refined (lithium hydroxide)

A$m

0

0

2 988

3 989

-100.0NA

33.5– Total (nominal) d g

A$m

4 972

20 256

17 90616 192

307.4

-11.6

-9.6

– Total (real) d g h

A$m

5 538

21 08317 90615 680

280.7

-15.1

-12.4

Spodumene priceLithium hydroxide price

Production– Mine (spodumene)
Export volume

Export value

Notes: a Lithium carbonate equivalent: this is a measure of the quantity of refined product; b Refined lithium products include lithium hydroxide and lithium carbonate; c In current calendar year US
dollars; d Prior to January 2021, ABS reported spodumene exports value and volume data was confidential. Data over this period instead sourced from the Western Australia Department of Mines;g Revenue from spodumene concentrate, lithium hydroxide and other lithium products; h In current financial year Australian dollars; f Forecast; s Estimate.
Source: ABS (2023), Company reports; Department of Industry, Science and Resources (2023); Government of Western Australia Department of Mines, Industry Regulation and Safety (2022);
Wood Mackenzie (2023).
Resources and Energy Quarterly September 2023

152

153

Summary

Revenue across the global battery value chain is projected to increase
five-fold by 2030, with a significant share of the revenue opportunities(around 90%) occurring downstream of the mining stage.



The current global battery supply chain remains very highly
concentrated geographically. Particular stages of the value chain —such as cell manufacturing and pack assembly — are expected todiversify in coming years. However, under current policy settings, otherstages such as crucial active material battery components are projected
to remain heavily concentrated (predominantly in China) to 2030.
Australia is a leading global source of battery raw materials (such ascobalt, copper, lithium, and nickel). However, there is an opportunity forAustralia to move downstream in the battery value chain.



16.2

The battery value chain

Global efforts to cut emissions by 2030 will drive growing battery demand
Global demand for Li-ion batteries is projected to more than quadruple (inGWh units) by 2030 compared to 2022 levels (Figure 16.1). Significant
growth over this period will be spurred by global efforts to increaseelectrification to achieve emissions reductions by 2030 in line withgovernment targets. Growth in demand is predominantly due to the uptakeof electric vehicles, but other sources of battery demand, including energy
storage systems and electronics, will also contribute to this growth.
Li-ion batteries are projected to remain dominant by 2030, making up
close to 97% of all batteries. This is because EV batteries make up closeto 85% of all batteries, and other battery chemistries are projected to makeup less than 1% of EV battery demand. However, there is a greater
opportunity for alternative battery technologies in the ESS (energy
stationary storage) market (7% of total battery demand). In this market, Liion batteries make up 72% of ESS battery demand, with a higher market
share for alternative battery technologies including flow batteries (including
vanadium flow batteries) (8%) and Na-ion batteries (5%).

Resources and Energy Quarterly September 2023

Significant revenue opportunities across the battery value chain
The rapid growth of global battery demand presents high revenue
opportunities across the battery value chain. Estimates of the value of
global battery market by 2030 have been produced by companies
including Accenture (A$460 billion) and McKinsey (US$404 billion).
McKinsey estimates revenue will increase five-fold relative to 2022 levels,
largely explained by projected growth in global battery demand.

Figure 16.1: Global Li-ion battery demand
4,000

3,000
GWh

16.1

2,000

1,000

2016

2018
2020
2022
Electric vehicles
Portable electronics
Motive products

2024
2026
2028
2030
Energy storage systems
Power devices

Note: Motive products include smaller personal devices such as scooters and wheelchairs.
Power devices are used for controlling electrical energy. Li-ion batteries make up a significant
share of all batteries.
Source: Wood Mackenzie

Most of the revenue for the battery value chain occurs downstream of themining stage. Analysis by Accenture (2023) and McKinsey (2023) suggest
the mining sector makes up roughly 10% of value added in the battery
value chain by 2030 (Figure 16.2).
Aside from the pack assembly stage, there is relatively less consensus
about how revenue will be distributed across other stages of the battery
value chain. Taking the average across these two sources produces thefollowing estimates of the share of value-added revenue by 2030: refining154

(8%), active materials (21%), cell manufacturing (37%), pack assembly(18%), re-use and recycling (6%). Given the rapidly changing status of this
sector, estimates of the distribution of revenue across the battery value
chain are largely indicative.

Figure 16.2: Estimated share of value-added revenue acrossthe global battery value chain, 2030

Figure 16.3: Share of global reserves, select countries andbattery minerals
25%
20%
15%

50%
10%
40%
5%
30%
0%
Australia

20%

Lithium
10%

CobaltCanadaGraphite

China
Manganese

United States
NickelNotes: Data not available for nickel in Brazil, cobalt and graphite in Canada, cobalt andgraphite in the United States. ‘Economically demonstrated resources’ as defined by
Geoscience Australia is referred to by the United States Geological Survey as ‘reserves’.

0%
MiningRefining

Activematerials
Accenture

Cell
manufacturing
McKinseyPackassembly

Re-use andrecycling

Note: Total revenue across the battery value chain is calculated in a manner that includes
revenue from re-use and recycling.
Source: Accenture (2023), McKinsey (2023)

16.3

BrazilMining raw materials

The mining of battery minerals is expected to increase dramatically in linewith rapidly growing global battery demand. Countries such as Australia —endowed with a large share of global battery mineral resources — havethe opportunity to meet growing demand (Figure 16.3). Importantly, manyof these minerals are featured in the list of critical minerals for regions
including Australia, Canada, European Union, and United States.
The Nickel and Lithium chapters of this publication contain discussion of
the Australian and global outlook for these minerals. For cobalt,
manganese, and graphite, see the Select Battery Minerals special topic
chapter of the June 2023 Resources and Energy Quarterly.

Resources and Energy Quarterly September 2023

Source: United States Geological Survey (2023), Geoscience Australia (2023)

16.4

Refining

Batteries need high purity materials, making the refining of battery
minerals an important stage of the value chain. Examples of refinedbattery chemicals include lithium hydroxide, nickel sulphate, cobalt
sulphate, high purity alumina, and vanadium pentoxide.
The global battery mineral refining market is currently highly
geographically concentrated, with China dominating across key materials(Figure 16.4). In Australia, there has been development of lithiumhydroxide production, alongside recent development of high purity alumina
production. Australia has also traditionally refined the majority of nickel
ores and concentrates produced domestically. See the Aluminium,
alumina and bauxite chapter for analysis of high purity alumina. For refinedlithium (e.g. lithium hydroxide and lithium carbonate), see the Lithium
chapter. For nickel sulphate, see the Nickel chapter.

155

Figure 16.4: Geographical distribution of mineral refining,
select battery minerals, 2022
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Figure 16.5: Components of a Li-ion (NMC) battery

Other
RussiaIndonesia
Australia
Japan
United States
Europe
China
Li

Co

Gr

Ni

Notes: Data is based on refining production capacity.

Cathode active material production is geographically concentrated

Source: International Energy Agency (2022)

Cathode active materials are produced industrially via a two-stage
process. The first stage (precursor manufacturing) combines andprocesses high purity battery materials (determined by the cathodechemistry, see Box 16.1) to produce precursor active materials. The
second stage mixes the precursor with either lithium hydroxide or lithium
carbonate, then undergoes further processing to produce the resulting
cathode active materials.

16.5

Battery components (active materials)

Batteries consist of specialised components including the cathode, anode,electrolyte and separator (Figure 16.5). The cathode consists of active
materials (battery components that participate in electrochemicalcharge/discharge reaction) such as lithium-nickel-manganese-cobalt-oxide(Li-NMC), current collector (typically aluminium foil), and other additives(PEM 2019). Importantly, batteries are typically named and categorised
according to the cathode composition as it is the primary distinguishingfeature (e.g. NMC, LFP, NCA). The anode is made up of active materials
including graphite, current collector (typically copper foil), and otheradditives. The electrolyte consists of conductive salt such as lithium
hexafluorophosphate and a chemical solvent (and potentially otheradditives). For the separator, several production technologies exist withdiffering material requirements.
The cathode and anode active materials is more complex to process thanthe other components, and make up a larger share of battery costs. The
rest of this section will focus on global output of these active materials.

Resources and Energy Quarterly September 2023

Global production of cathode active materials (the second stage) is
geographically concentrated in three countries (Figure 16.6). In 2022,
China had the highest share of production (74%), followed by Korea (15%)
and Japan (9%). By 2030, China’s share of production is currently
projected to be increasingly dominant (80%), while Korea (10%) andJapan (4%) lose market share. This is because China is continuing to build
processing capacity at a faster pace than other countries. Global
production of precursor cathode active materials (the first stage) is very
similar in terms of current and projected geographical concentration.

156

Figure 16.6: Share of global cathode active material production

Box 16.1: Trends in battery cathode chemistryBattery cathode chemistry has important flow-on impacts across thebattery value chain, influencing mineral requirements and battery
performance.

100%
90%
80%
70%

Other

60%

United States

50%

Poland

40%

Japan

30%

South Korea

20%

China

10%
0%
2016 2018 2020 2022 2024 2026 2028 2030
Notes: Global market share measured in kt units.
Source: Wood Mackenzie (2023)

The mineral composition of the cathode varies significantly across battery
chemistries (Figure 16.7M). The three main cathode classes are LFP(lithium iron phosphate), NMC (nickel manganese cobalt oxide), and NCA(nickel cobalt aluminium oxide). The nickel in NMC and NCA cathodes
support energy density and longer mileage for electric vehicles. Cobalt
adds stability to the battery but is costly. LFP batteries do not use nickel or
cobalt, decreasing the material cost of LFP but also leading to lower
energy density for the battery. The anode share of battery costs tends tovary less across battery chemistries due to the staple use of graphite.
Figure 16.7: Cathode and anode active materials as a share of total battery
costs, select battery chemistries, 2022

Anode active material production is relatively geographically concentrated

70%

Production of anode active materials primarily involves the use of either
graphite or a graphite-silicon composition. Graphite can be either synthetic
or naturally sourced. Natural flake graphite typically undergoes processing
to become spherical graphite for use in batteries. Synthetic graphite is
typically more expensive and made via refining materials such as coke. In
2022, 63% of graphite was estimated to be synthetic. By 2030, the shareof synthetic graphite is expected to be little changed.

60%

Global production of anode active materials is very geographicallyconcentrated (Figure 16.9). A key reason for this is that both natural andsynthetic graphite require sophisticated processing to produce theresulting anode active materials.
In 2022, China led global production (80%), followed by Japan (11%) andKorea (4%). By 2030, China’s share of production is expected to increase
to 85%, while Korea (5%) and Japan (3%) is expected to lose market
share.

Resources and Energy Quarterly September 2023

50%
40%
30%
20%
10%
0%
LCO

LFP

NMC811

Lithium
NickelOther cathode materials

NMC532

NMC111

NMCA

CobaltManganese
Anode materials

Notes: Other battery costs include: other cell materials, module and pack materials,
processing and manufacturing costs, and other costs.
Source: Wood Mackenzie (2023)

157

The choice of cathode chemistry for battery production is subject tochanges in minerals costs and technological developments. Notably, thegrowing share of LFP in recent years is driven by Chinese technologicalbreakthroughs improving energy density and cycle life. Alongside elevatedmineral costs in recent years, this rise in energy density has improved theviability of LFP batteries for EVs and for power sector energy storage.
In 2022, the NMC remains the dominant cathode chemistry (48%combining low, mid and high nickel NMC), followed by L(M)FP (26%) andN(M)CA (14%) (Figure 16.8). By 2030, L(M)FP (37%) is projected toovertake NMC (29% combined), followed by N(M)CA (18%).

Figure 16.9: Share of global anode active material production
100%
90%

Other

80%

Poland

70%
60%

US

50%

India

40%

Germany

30%

South Korea

20%

Japan

10%
Figure 16.8: Share of global cathode material demand, by cathode chemistry

China

0%
2016 2018 2020 2022 2024 2026 2028 2030

100%

Notes: Global market share measured in GWh units. Data in terms of production capacity.

90%

Source: Wood Mackenzie (2023)

80%

16.6

70%

Battery cell manufacturing

60%

Global battery manufacturing to diversify as new facilities begin production

50%

Battery cell manufacturing can be broadly categorised into two stages. The
first stage involves producing the cathode electrode and anode electrode.
To produce the cathode (anode) electrode, cathode (anode) active
material is mixed with a binder, solvent and additives, before coating thealuminium (copper) current collectors. The second stage produces theresulting battery cells. The electrodes are rolled and then dried. The
electrodes are then stacked with a separator in between, creating the cell.

40%
30%
20%
10%
0%
2016

2018

2020

2022

LCO
Low nickel NMC
High nickel NMC
Mn rich

2024

2026

2028

2030

LFP
Mid nickel NMC
N(M)CA

Notes: Global market share measured in kt units. Excludes Na-ion, solid-state, advanced
batteries for simplicity.
Source: Wood Mackenzie (2023)

Resources and Energy Quarterly September 2023

The geographical concentration of global Li-ion battery production is
expected to lessen as new battery makers upscale, particularly in Europe
and North America. In 2022, China made up 79% of global production,
followed by the EU (9.9%), US (4.3%), Korea (3.6%), and Japan (2.5%)(Figure 16.10). By 2030, China’s share is expected to decrease to be 71%,
followed by the US (10%), EU (10%), Korea (1.9%), and Japan (1.8%).
‘Other countries’ have less market share than Japan by 2030 (1.5%).

158

Figure 16.10: Share of global Li-ion battery productionthat Na-ion batteries can use current Li-ion battery manufacturing
infrastructure with little retro-fitting. The charge rate of Na-ion batteries isalso superior. The primary limitation of Na-ion batteries is the lower
energy density. As a result, this technology is primarily expected to disrupt
battery applications where energy density is less of a priority, such as the
low-range EV market and two-to-three wheeler market.

100%
90%
80%
70%
60%

Na-ion batteries may displace global cathode material demand,
particularly lessening demand for lithium. Current market estimates of the
future cathode material market share of Na-ion batteries by 2030 varysignificantly, ranging from 1% to 17%.

50%
40%
30%
20%
10%
0%
2016

2018

2020

China

USA

EU

2022

2024

South Korea

2026

Japan

2028

2030

Other countries

Note: Above market shares assume that any facilities not yet announced will be distributed
across countries, consistent with forecast country market shares. Market share based on
production capacity in GWh units.
Source: Wood Mackenzie (2023)

Box 16.2: Alternative battery technologies

Technological developments for alternative battery technologies are alikely but uncertain source of disruption for the global battery value chain.
The uptake of any battery technology development is broadly dictated by
the performance of the next generation battery across five categories:
energy density (particularly relevant for EV range), cycle life (influences
battery lifespan), cost competitiveness, charge rate, and safety.
Two noteworthy potential technologies include Na-ion batteries and solidstate batteries. Notably, the potential disruption due to each of thesebattery technologies is very different, owing to differences in the material
composition and expected performance of these technologies.

Solid state batteries improve energy density and safety but require
higher consumption of key minerals including lithium. This technology
reduces the liquid content of the battery, impacting the material
composition of the electrolyte and anode. In terms of the anode, materials
may shift away from graphite and towards more silicon and lithium metal
anodes. There is further uncertainty due to the various types of potential
solid state technologies (e.g. solid oxide, sulphide, and polymer).
Currently, lithium is predominantly used in the cathode of Li-ion batteries
and about 90% of the anode is made with graphite. Solid state batteries
present significant upside for global lithium demand since they also needlithium in the battery anode (45-130% more lithium that typical Li-ion
batteries). There is likely to be limited commercialisation of this technology
by 2030 (virtually no global market share or less than 5%). However,global demand for minerals (including lithium) remains sensitive topotential technological advancements in this sector.
For stationary energy storage (ESS), a wider range of technologies
including molten salt batteries and flow batteries (including vanadium)are suitable for long durations. Accenture estimates flow batteries could
occupy a 4% share of the global ESS market by 2030.

Na-ion batteries replace the use of lithium with sodium (as carrier of
positive charge), presenting a cost competitive alternative. It is claimed

Resources and Energy Quarterly September 2023

159

16.7

Battery pack assembly

16.8

Battery recycling

Global battery pack assembly to be relatively diverse as the sector grows

Significant potential for battery recycling by 2040, subject to development

Battery pack assembly typically involves two distinct stages. Firstly, battery
cells are assembled together in frames to form battery modules. Secondly,
modules are linked together and enclosed in the battery pack.

There is a significant opportunity for battery recycling as the stock of spentbatteries grows alongside global battery demand. In terms of battery
recycling, there are various techniques that are now commercial in use orin pilot. Under the IEA’s Sustainable Development Scenario (SDS), it isestimated that, by 2040, over 80% of these batteries will come from EVs,
and over 10% from two- and three wheelers (IEA 2021). The two main
ways to deal with this stock is reuse or recycling. The IEA estimate thereuse of batteries will make up 1-2% of global battery supply requirements
by 2040. Several governments have also announced policies relating tobattery recycling. For example, the EU Sustainable and Smart Mobility
Initiative sets minimum levels of recycled content (12% cobalt, 4% lithium
and 4% nickel by 2030) and material recovery (90% cobalt, 90% copper,
35% lithium and 90% nickel by 2026), rising gradually.

Figure 16.11: Projected share of global battery pack assembly
revenue, 2030
50%
45%
40%
35%
30%
25%
20%

Recycling is projected to contribute an important (but uncertain) share of
global battery mineral supply by 2040. Based on a battery collection rate of
80%, the IEA SDS projects recycling as a share of global demand to be
12% for cobalt, 5% for lithium, and 7% for nickel (Figure 16.12).

15%
10%
5%
0%
China

EuropeUnited States

Other

Figure 16.12: Recycling as a share of global demand, 2040

Notes: Revenue determined on a value-added basis, deducting revenue from upstream
stages of the value chain.

50%

Source: McKinsey (2023)

40%

Global battery pack assembly is relatively less geographicallyconcentrated compared to other stages of the value chain. In 2017, theAssociation of Mining and Exploration Companies estimate Japan leads
global battery pack assembly (53%), followed by China (20%), Korea(14%) and the US (9%) (market shares in 2022 are not provided due tolack of sources).

30%

By 2030, China is projected to lead global battery pack assembly (46%),
followed by Europe (30%) and the US (15%) (Figure 16.11).

Resources and Energy Quarterly September 2023

20%
10%
0%
Woodmac

CobaltIEA - STEPS
Lithium
Nickel

IEA - SDS

Notes: STEPS = Stated Policy Scenario, SDS = Sustainable Development Scenario.
Source: International Energy Agency (2022), Wood Mackenzie (2023)

160

Other sources vary in terms of the magnitude of these estimates. By 2030,
recycling is expected to be much less than 2040 levels due to a lower
stock of spent batteries.

16.9

Australia

Australia is a leading global source of battery minerals, with a high shareof the upstream (mining) market
Australia is a leading global exporter of battery minerals such as lithium,cobalt, copper and nickel. This owes much to Australia’s high endowmentof battery mineral resources (Figure 16.3). Furthermore, Australia has along history of being a favourable destination for investment in mineral
exploration and mining. Most battery minerals mined in Australia are
currently exported due to the lack of domestic downstream processing
facilities.
Efforts to move downstream in the battery value chain, supported bygovernment
The Australian government has announced upcoming support forAustralian battery industries through:•••The National Battery Strategy: to guide governments and industry
towards a shared vision of a diverse and competitive battery
manufacturing industry.
Establishing a Battery Manufacturing Precinct: up to $100 million in
equity investment to boost domestic manufacturing.
Establishing a Powering Australia Industry Growth Centre:
providing advanced technology and skills development tobusinesses looking to locally manufacture renewable energy
technologies$3 billion for renewables and low emissions technologies, $1 billion forvalue-adding in resources, and $1 billion for critical technologies).

16.10 References
Accenture (2023) Charging Ahead: Australia’s battery powered future,
Future Battery Industries, accessed 12 September 2023.
AMEC (Association of Mining and Exploration Companies) (2017) A
Lithium industry in Australia: A value chain analysis for down streaming
Australia’s lithium resources, AMEC, accessed 12 September 2023.
GA (Geoscience Australia) (2022) Australia’s Identified Mineral Resources
2022, GA, accessed 12 September 2023.
IEA (International Energy Agency) (2022) Global Supply Chains of EV
Batteries, IEA, accessed 12 September 2023.
IEA (International Energy Agency) (2021) The Role of Critical Minerals in
Clean Energy Transitions, IEA, accessed 12 September 2023.
McKinsey (2023) Battery 2030: Resilient, sustainable, and circular,
Mckinsey, accessed 13 September 2023.
PEM (2019) Manufacturing of lithium-ion battery cell components,
Rwthaachen University, accessed 12 September 2023.
USGS (United States Geological Survey) (2023) Critical Mineral
Resources, USGS, accessed 12 September 2023.
Wood Mackenzie (2023) Electric Vehicle & Battery Supply Chain Strategicplanning outlook to 2050 June 2023, Wood Mackenzie, accessed 12
September 2023.

This support builds on other measures including $6 billion of finance under
the National Reconstruction Fund to areas which cut across the battery
value chain (comprised of $1 billion for advanced manufacturing, up to

Resources and Energy Quarterly September 2023

161

Trade summary charts and tables

Figure 17.3: Principal markets for Australia’s resources exports,
2023–24 dollars

Figure 17.1: Industry shares of GDP
80
GDP: $1759 b

60

61 61

60

2

8 10

3

0
Agriculture, forestry
and fishing

7

8

5

9 10

China Japan Other

5 2

5

Other Other AsiaJapanSouth Korea EU

4 1

2 1

India Thailand

2022–23

Figure 17.4: Principal markets for Australia’s energy exports,
2023–24 dollars
60

6 5

Other South India
Asia Korea
2012–13 2022–23

42
40

5

3

EU

1 1
UnitedStatesNote: Some country details have been confidentialised by the Australian Bureau of Statistics.
Source: ABS (2023) International Trade in Goods and Services, 5368.0

Resources and Energy Quarterly September 2023

11

Source: ABS (2023) International Trade in Goods and Services, 5368.0

Per cent

Per cent

0

9 11

7 5

Note: Some country details have been confidentialised by the Australian Bureau of Statistics.

Exports: $486 b
15
11

China

7 9

2012–13

Exports: $237 b
23
21

13 15

2022–23

Figure 17.2: Principal markets for Australia’s resources and energy
exports, 2023–24 dollars
3735

0

Services

Source: ABS (2023) Australian National Accounts, National Income, Expenditure &Production, 5204.0

10

Exports: $237 b

20

7Manufacturing
2012–13

20

51

40

20

30

Exports: $146 b

61

Per cent

Per cent

GDP: $2230 b

40

40

80

Exports: $91 b

37

Exports: $249 b
15

20
7
0

Japan

Other

11 14

13 12

South
Korea

Other
Asia

2012–13

5

11

Taiwan

15

11

China

7 8
India

2022–23

Note: Some country details have been confidentialised by the Australian Bureau of Statistics.
Source: ABS (2023) International Trade in Goods and Services, 5368.0

163

Figure 17.5: Principal markets for Australia's total exports,
2023–24 dollars

Figure 17.7: Proportion of goods and services exports by sector
10060

Per cent

32
29

30
25

1919

20

0

Exports: $616 b

8 8
China

Japan

South
Korea

Per cent

Exports: $330 b
40

5 5
India

4 4

3 4

3 3

Taiwan UnitedSingapore Other
States19

China

Per cent

Per cent

42

UnitedStatesJapan

South SingaporeThailand
Korea

2012–13

0

5 4
Other

2022–23

Note: Some country details have been confidentialised by the Australian Bureau of Statistics.
Source: ABS (2023) International Trade in Goods and Services, 5368.0

Resources and Energy Quarterly September 2023

2021–22

Other
merchandise2022–23

66

69 66

40
20

5 4

60

60

26

6 6

2020–21

80
47

8 6

Mineral resources

Figure 17.8: Proportion of merchandise exports by sector

Imports: $437 b

11 11

Rural

Source: ABS (2023) Balance of Payments and International Investment Position, 5302.0

60
Imports: $316 b

14 13 11 10

12 12 12 13

2019–202022–23

Figure 17.6: Australia's total imports by country of origin,
2023–24 dollars

0

40

0

Note: Some country details have been confidentialised by the Australian Bureau of Statistics.
Source: ABS (2023) International Trade in Goods and Services, 5368.0

40

60

20

2012–1320

74 76 77 77

80

11 11 10 9

10 10 11 11
Rural
2019–20

Mineralresources
2020–21

Other
merchandise
2021–2219

14 10 14Services2022–23

Source: ABS (2023) Balance of Payments and International Investment Position, 5302.0

164

Table 17.1: Principal markets for Australia’s thermal coal exports, 2023–24 dollars
Unit

2018–192019–20

2020–212021–222022–23Japan$m

13,934

9,869

8,155

26,53339,290

Taiwan

$m

3,789

2,821

2,397

7,392

9,842

South Korea

$m

4,567

3,361

2,988

7,596

4,969

China

$m

5,068

4,646

566

0

3,666

Malaysia

$m

1,084

632

651

1,595

2,463

Vietnam

$m

796

1,231

828

1,881

2,214

Total

$m

31,10224,091

18,626

51,52868,185

Source: ABS (2023) International Trade in Goods and Services, 5368.0

Table 17.2: Principal markets for Australia’s metallurgical coal exports, 2023–24 dollars
Unit

2018–192019–20

2020–212021–222022–23India$m

13,470

8,855

8,819

23,26917,800

Japan

$m

9,175

7,193

5,519

15,742

16,342South Korea

$m

4,821

3,586

3,178

10,504

8,595

Taiwan

$m

3,112

2,357

1,550

4,419

3,912

Netherlands

$m

2,147

1,468

1,030

4,569

3,740

China

$m

11,84911,560

1,941

0

514

Total

$m

52,28340,48926,97775,28964,612

Source: ABS (2023) International Trade in Goods and Services, 5368.0

Resources and Energy Quarterly September 2023

165

Table 17.3: Principal markets for Australia’s crude oil and refinery feedstocks exports, 2023–24 dollars
Unit

2018–192019–20

2020–212021–222022–23

Singapore

$m

2,331

1,608

1,932

1,685

1,665

South Korea

$m

831

399

104

723

1,148

China

$m

1,208

1,221

188

176

1,062

Thailand

$m

1,342

731

424

0

935

Malaysia

$m

1,965

1,198

765

52

918

Japan

$m

360

162

106

244

231

Total

$m

10,86910,651

8,649

15,63013,811

Note: Department of Industry, Science and Resources estimates based on International Trade Centre data.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; International Trade Centre (2023) International Trade Statistics

Table 17.4: Principal markets for Australia’s LNG exports, 2023–24 dollars
Unit

2018–192019–20

2020–212021–222022–23Japan$m

25,41323,561

13,55327,62635,916

China$m20,946

19,244

13,23623,861

20,642South Korea

$m

6,358

6,102

3,889

12,781

19,057

Taiwan

$m

2,808

3,066

2,603

8,378

12,562Singapore

$m

1,482

1,229

203

2,647

3,294

Malaysia

$m

1,045

1,721

581

623

2,207

Total

$m

59,58056,19035,45978,612

96,026

Note: Department of Industry, Science and Resources estimates based on International Trade Centre data.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; International Trade Centre (2023) International Trade Statistics

Resources and Energy Quarterly September 2023

166

Table 17.5: Principal markets for Australia’s iron ore exports, 2023–24 dollars
Unit

2018–192019–20

2020–212021–222022–23

China$m76,042100,246

145,223

120,647

109,106

Japan

$m

6,898

8,321

10,565

11,4258,460

South Korea

$m

5,591

7,356

10,510

9,238

7,148

Taiwan

$m

2,118

2,218

3,572

3,112

2,060

India

$m

284

24

11

38

69

Indonesia

$m

52

32

47

43

39

Total

$m

92,919121,616

177,981

147,585

129,234

Source: ABS (2023) International Trade in Goods and Services, 5368.0

Table 17.6: Principal markets for Australia’s aluminium exports, 2023–24 dollars
Unit

2018–192019–20

2020–212021–222022–23

South Korea

$m

920

1,346

1,053

1,146

1,602

Japan

$m

1,581

1,201

1,112

1,676

1,373

United States

$m

1,008

292

298

663

555

Thailand

$m

470

342

406

581

362

Chinese Taipei

$m

351

426

485

688

332

Indonesia

$m

144

113

129

182

149

Total

$m

4,991

4,365

4,378

6,360

5,499

Source: ABS (2023) International Trade in Goods and Services, 5368.0

Resources and Energy Quarterly September 2023

167

Table 17.7: Principal markets for Australia’s copper exports, 2023–24 dollars
Unit

2018–192019–20

2020–212021–222022–23

China

$m

4,321

4,478

3,196

2,181

2,461

South Korea

$m

818

770

1,530

1,532

1,480

Malaysia

$m

1,487

974

989

1,070

1,129

India

$m

532

547

729

1,048

476

Japan

$m

2,196

2,514

20

20

1

Philippines

$m

733

426

0

0

0

Total

$m

11,705

12,06913,31013,51012,792

Note: a exports of ores and concentrates to these countries have been confidentialised since June 2020.
Source: ABS (2023) International Trade in Goods and Services, 5368.0.

Table 17.8: Principal markets for Australia’s gold exports, 2023–24 dollars
Unit

2018–192019–20

2020–212021–222022–23

China

$m

6,077

974

2,360

9,111

8,474

Hong Kong

$m

5,236

3,950

1,641

5,450

3,932

Singapore

$m

1,904

1,682

3,412

1,790

3,622

Switzerland

$m

1,391

2,245

2,197

2,092

2,330

India

$m

693

78

1,715

2,148

1,570

United States

$m

152

3,641

4,581

1,539

1,302

Total

$m

22,60528,84230,372

25,84425,401

Source: ABS (2023) International Trade in Goods and Services, 5368.0

Resources and Energy Quarterly September 2023

168

AppendicesAppendix A
Definitions and classifications
A.1

Exchange rates

In this report, the AUD/USD exchange rate (Australian dollar relative to
the US dollars) is based on the median of economic forecasters at the timethat the report is prepared. The source is the Bloomberg survey of
economic forecasters.
World commodity prices are typically denominated in US dollars, andexchange rate movements can have a significant effect on the actual
outcomes of commodity prices and export earnings. A change in the valueof the US dollar against other floating international currencies caninfluence movements in world resources and energy prices. A change in
the Australian dollar against the US dollar will impact on export earnings
for domestic commodity exporters and producers. There is substantial
uncertainty surrounding any exchange rate forecast, with changes toexchange rates influenced by changes in financial market sentiment,
sometimes resulting in strong volatility.

A.2

Conversion to real dollars

Nominal values and prices are converted to real dollars using Australianand US consumer price indexes (CPI). The Australian and US CPI
forecasts are based on the median of economic forecasters at the timethat the report was prepared. The source is the Bloomberg survey of
economic forecasters.

Resources and Energy Quarterly September 2023

A.3

Time periods

The terms ‘estimate’, ‘forecast’ and ‘projection’ refer to different time
periods in this report. Estimate refers to a time period that has passed, but
for which full historical data is not yet available, while ‘forecast’ and‘projection’ refer to different periods in the future. It is important todistinguish between different future time horizons, as factors affecting
production, consumption and prices in the short-term differ from factors
affecting these components in the medium to long-term. Forecasts also
become increasingly imprecise over longer time horizons, due toincreased risk and uncertainty. For these reasons, the Department ofIndustry, Science and Resources’ Office of the Chief Economist(DISR OCE) uses different terminology to distinguish between short-term
forecasts and medium to long-term projections, as outlined in Table A2.
Table A1: OCE terminology for different time periods/horizons
PeriodYears

Terminology

Historical

Time period has passed but
complete data for the period is not
yet available

Estimate

Short-term

1 to 2 years

Forecast

Medium-term

3 to 5 years

Projection

Long-term

Beyond 5 years

n/aSource: Department of Industry, Science and Resources (2023)

170

A.4

Commodity classifications

The DISR OCE defines exports for each commodity by a selected set of 8digit Australian Harmonised Export Commodity Classification (AHECC)
codes. Where possible, the choice of AHECC codes is based on alignment
with international trade data, to ensure that direct comparisons can be
made. For example, groupings for various commodities are aligned withclassifications used by the International Energy Agency, World Steel
Association, International Nickel Study Group, International Lead and Zinc
Study Group, International Copper Study Group and World Bureau ofMetal Statistics.

In this report, benchmark prices and Australian production and exports are
forecast for 21 commodities, as shown in Table A2. In estimating a total forAustralia’s resources and energy exports, the remaining commodities,
defined as ‘other resources’ and ‘other energy’, are forecast as a group.

Table A2: Resources and energy commodities groupings and definitions
Resources (non-energy)

EnergyDefinition

Resource commodities are non-energy minerals andsemi-manufactured products produced from nonenergy minerals

Energy commodities are minerals and petroleum
products that are typically used for power generation

Australian Harmonised Export Commodity
Classification (AHECC) chapters

25 (part); 26 (part); 28 (part); 31 (part); 73 (part); 74;
75; 76; 78; 79; 80; 81

27 (part)

Commodities for which data is published, forecasts are
made and analysed in detail in this report

Aluminium; alumina; bauxite; copper; gold; iron ore;
crude steel; nickel; zinc, lithium

Crude oil and petroleum products; LNG; metallurgicalcoal; thermal coal; uranium

Notes: The AHECC chapter is the first two digits of the trade code. Groupings are made at the 8-digit level.
Source: Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

171

Appendix B

Glossary

Term

Description

A$

Australian dollar

ABS

Australian Bureau of Statistics

AHECC

Australian Harmonized Export Commodity Classification

AISC

All-In Sustaining Cost — an extension of existing cash cost metrics and incorporates costs related to sustaining production.

Base metals

A common metal that is not considered precious (includes aluminium, copper, lead, nickel, tin, zinc)

Bbl

BarrelBcm

Billion cubic metres

BenchmarkA standard specification used to price commodities.

BF and BOF

Blast furnace and basic oxygen furnace — used in an integrated steelmaking process that uses iron ore and coal.

Bulks

Non-liquid and non-gaseous commodities shipped in mass and loose (iron ore, coal, bauxite)

CAGR

Compound annual growth rate

Capex

Capital expenditure

CFR

Cost and freight — Seller clears exports, and pays freight.

CIF

Cost, Insurance, and Freight

Coal Seam Gas (CSG)

Natural gas found in coal seams. Also known as Coal Bed Methane (CBM)

Coke

Made by heating coal at high temperatures without oxygen, and used to reduce iron ore to molten iron saturated with carbon, called hot metal

Resources and Energy Quarterly September 2023

172

Conventional gas

Natural gas that can be produced from reservoirs using traditional techniques. Contrasts with unconventional gas.

COVID-192019 Novel Coronavirus

CPB

CPB Netherlands Bureau for Economic Policy Analysis

CPI

Consumer Price Index — measures quarterly changes in the price of a basket of goods and services which account for a high proportion of
expenditure by the CPI population group (i.e. metropolitan households).

Crude steel

Steel in the first solid state after melting, suitable for further processing or for sale.

DES

Delivered Ex Ship — price of LNG including shipping and insurance.

DISR

Department of Industry, Science and Resources

DMO

Domestic Market Obligation — a policy to reserve energy commodities for domestic usage

DRC

Democratic Republic of the Congo

ECB

European Central Bank

Economic growth

An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. It is measured in
nominal or real gross domestic product (GDP).

EIAThe United States Energy Information Administration

EAF

Electric arc furnace — a furnace that melts steel scrap using the heat generated by a high power electric arc.

ETF

Exchange Traded Fund — an exchange traded fund that allows investors to invest in gold on the exchange.

EUV

Export unit value — export value/volumes exported

EV

Electric vehiclef

Forecast — a two year outlook

FEED

Front end engineering design

FID

Final investment decision

Resources and Energy Quarterly September 2023

173

FOB

Free on board — seller clears export, buyer pays freight.

GAD

Gross air dried basis — For measuring coal quality.

GAR

Gross as received basis — For measuring coal quality.

GBP

Great Britain Pounds

GDP

Gross Domestic Product — measures the value of economic activity within a country/group.

GFC

Global Financial Crisis — the period of extreme stress in global financial markets and banking systems between mid-2007 and early 2009.

GJ

Gigajoule

GST

Goods and Services Tax — a value-added tax levied on most goods and services sold for domestic consumption.

HCC

Hard coking coal — The best grade of metallurgical coal used in the steel production process. Australian hard coking coal is regarded as theindustry benchmark.

IEA

International Energy Agency

IMF

International Monetary Fund — an international organisation that promotes international financial stability and monetary cooperation.

IMO

International Maritime Organisation

IP

Industrial Production — measures the output of the industrial sector that comprises mining, manufacturing, utilities and construction.

IPO

Initial public offering — a process of offering shares of a private corporation to the public in a new stock issuance.

ISM

US Institute for Supply Management

ISM

Institute of Supply Management

JCC

Japan Customs-cleared Crude (or Japan Crude Cocktail) — average price of crude oil imported by Japan and a common price index in long-term
LNG contracts.

JFY

Japanese fiscal year

kcal/kg

Kilocalories per kilogram

Resources and Energy Quarterly September 2023

174

kt

Thousand tonnes

ktpa

Kilotonnes per annum

LBMA

London Bullion Market Association

LCE

Lithium Content Equivalent

Li OH

Lithium Hydroxide

LME

London Metal Exchange

LNG

Liquefied natural gas

LNY

Lunar New Year

LPG

Liquefied petroleum gas

LVPCI

Low volatile pulverised coal injection — a type of low volatile coal used in the PCI processmMillionMMbtu

Million British thermal units

Mt

Million tonnes

mtpa

Million tonnes per annum

MW

Megawatts

Nameplate capacity

The theoretical maximum annual production capacity

NAR

Net as received basis — For measuring coal quality

NDRC

China’s National Development and Reform Commission

NEVNew energy vehicle — term used for plug-in electric vehicles eligible for public subsidies (battery electric vehicles and plug-in hybrid vehicles)

Resources and Energy Quarterly September 2023

175

OCE

Office of the Chief Economist

OECD

Organisation for Economic Co-operation and Development

OPEC

Organisation of Petroleum Exporting Countries, a formal alliance of 14 countries to collaborate to manage the world oil market

OPEC+

Informal term for agreements between OPEC and ten other oil-producing countries (which are not members of OPEC)

Oz

Ounce

PCE

Personal Consumption Expenditure — a measure of the changes in price of consumer services and goods.

PCI

Pulverised coal injection — PCI coal is used for its heat value and injected directly into blast furnaces as a supplementary fuel, which reduces theamount of coke required.

PCI

Pulverised coal injection — a process used in blast furnace operationsPM

The afternoon price of gold set at 3.00pm each business day at the London Bullion Market Association

PMI

Purchasing Managers Index — an indicator of economic health for manufacturing and service sectors.

PPP

Purchasing Power Parity — a way of measuring economic variables in different countries that equalise the purchasing power of different
currencies

RoW

Rest of worlds

Estimate — Incomplete data or subject to revision

Shale gas

Natural gas found in shales

SDR

Special drawing right

SHFE

Shanghai Futures Exchange

SSCC

Semi-soft coking coal — A type of metallurgical coal used in the steel production process alongside hard coking coal, but results in a lower coke
quality and more impurities.

TariffA tax on imports or exports that is used by governments to generate revenue or to protect domestic industries from competition.

Tight gas

Natural gas found in low quality reservoirs

Resources and Energy Quarterly September 2023

176

TWI

Trade Weighted Index — a measure of the foreign exchange value of the US dollar against a basket of major foreign currencies.

U3O8

Triuranium octoxide — a compound of uranium.

UAE

United Arab Emirates

UK

United Kingdom

Unconventional gas

Natural gas that is more difficult to extract, including coal seam gas, shale gas and tight gas. Contrasts with conventional gas.

US

United States

US$

United States dollar

WEO

The International Energy Agency’s World Energy Outlook

WTI

West Texas Intermediate crude oil pricez

Projection of a five year outlook

Resources and Energy Quarterly September 2023

177

About this edition
The Resources and Energy Quarterly uses IMF economic growth forecasts
as the basis of its world growth forecasts.

The Resources and Energy Quarterly (REQ) contains forecasts for thevalue, volume and price of Australia’s major resources and energy
commodity exports.

In this report, commodities are grouped into two broad categories,
referred to as ‘resources’ and ‘energy’. ‘Energy’ commodities comprise
metallurgical and thermal coal, oil, gas and uranium. ‘Resource’commodities in this report are all other mineral commodities.

A ‘medium term’ (five year) outlook is published in the March quarter
edition of the Resources and Energy Quarterly. Each June, September
and December edition of the Resources and Energy Quarterly features a‘short term’ (two year) outlook for Australia’s major resource and energy
commodity exports.
Underpinning the forecasts/projections contained in the Resources andEnergy Quarterly is the outlook for global resource and energy commodity
prices, demand and supply. The forecasts/projections for Australia’s
resource and energy commodity exporters are reconciled with this global
context. The global environment in which Australia’s producers compete
can change rapidly. Each edition of the Resources and Energy Quarterly
factors in these changes and makes alterations to the forecasts andprojections by estimating the impact on Australian producers and the valueof their exports.

Unless otherwise stated, all Australian and US dollar figures in this report
are in nominal terms. Inflation and exchange rate assumptions areprovided in tables 2.1 and 2.2 in the Macroeconomic outlook chapter.
Information in this edition of the Resources and Energy Quarterly iscurrent as of 22 September 2023.

Resources and Energy Quarterly publication schedule
Publication

Expected release date

Outlook period final year

18 December 2023

Australian data: 2024–25
World data: 2025

March 2024

2 April 2024

Australian data: 2028–29
World data: 2029

June 2024

1 July 2024

Australian data: 2025–26
World data: 2026

30 September 2024

Australian data: 2025–26
World data: 2026

December 2023

September 2024
Source: Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly September 2023

178