Contents
Executive Summary

4

Overview

5

Macroeconomic Outlook

15

Steel

25

Iron Ore

34

Metallurgical Coal

44

Thermal Coal

54

Gas

65

Oil

76

Uranium

85

Gold

91

Aluminium

101

Copper113

Trade summary charts and tables

143

Nickel122

Appendix A: Definitions and classifications

150

Zinc

128

Appendix B: Glossary

153

Lithium

135

About the edition

159

Resources insights
Aluminium – Box 11.1
Russia’s aluminium/alumina/bauxite production and trade111

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
Steel and iron ore: Colin Clark
Metallurgical coal: Ranjini Palle and Sufyan Saleem
Thermal coal: Ranjini Palle
Uranium: Sufyan Saleem
Gas: Mark Gibbons
Oil and zinc: Justin Tang
Aluminium, alumina and bauxite: Andy Lee
Copper: Andrew Nash
Nickel: Kaycee Handley
Lithium: Charlie Qin

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

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Department of Industry, Science and Resources, Commonwealth of Australia
Resources and Energy Quarterly September 2023.
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Executive Summary
The profile for Australian resource and energy export earnings is littlechanged from the September 2023 Resources and Energy Quarterly(REQ) report, improving slightly in aggregate. Exports are forecast to be$408 billion in 2023–24, down from a record $466 billion in 2022–23 —when the fallout from the Russian invasion of Ukraine contributed to amajor spike in energy prices. Exports are forecast at $348 billion in
2024–25 as prices soften and the AUD/USD lifts.
World economic growth remains relatively soft, weighed down by tighter
financial conditions; central banks in the major Western economies
continue to clamp down on inflation, and inflation appears to be easing insome nations. The IMF’s latest forecasts (October) are largely unchanged.
However, concerns around a hard landing in the US have eased
considerably and the outlook for China has improved, given stronger than
expected economic results and the Government taking further measures
to stabilise the nation’s residential property sector. Both developments
help the outlook for resource and energy commodity demand.
Strong capital expenditure (on infrastructure and in the manufacturingsector) and rising motor vehicle exports have helped sustain Chinese steel
production in the face of falling residential construction. Steady world steel
output and low Chinese iron ore inventories recently helped push iron ore
prices above US$120 a tonne. Other bulk commodity prices also remainhigh in historical terms. The metallurgical coal market remains tight due tosupply problems, including lower Russian exports. Improving supply is
expected to see bulk commodity prices to drift down in the outlook period.
To date, there has been very limited impact of the conflict in the Middle
East on the global economy and energy prices. After repeated OPEC+
supply cuts, world oil stocks remain relatively low, keeping oil prices more
vulnerable to supply shocks. Worries that the Hamas-Israel conflict could
cause a disruption to Middle East oil and LNG supplies sparked a rise inenergy prices early in the December quarter. But weak world demand andthe absence of any fallout on Middle East oil supply has helped move oiland LNG prices back close to pre-conflict levels.
Resources and Energy Quarterly | December 2023

Nonetheless, reduced global supply of energy commodities following theimplementation of Russian sanctions has raised the vulnerability ofgas/LNG/coal prices to supply outages and demand spikes. As such, there
is more uncertainty than in the past around how energy prices may
develop through the Northern Hemisphere winter and summer demand
peaks. Stockpiles of gas in Europe are high heading into winter. Likewise,high stocks of thermal coal in China and Europe have seen thermal coalprices come down.
There has been a surge in uranium prices in recent months. New supply
problems have added to the impact of hoarding and, on the demand side,some nations continue to favourably reconsider the role nuclear power canmake in meeting their ‘net zero’ targets and ensuring their energy security.
Bond yields recently hit decade highs, as the fixed interest market
reassessed how high the US Fed Funds rate would need to go and for
how long. High bond yields would normally have hurt the gold price, but
geopolitical tensions have helped sustain gold at close to US$2,000 an
ounce.
There are high chances of drier than normal conditions in eastern Australia
over the next 3-6 months. This lowers the risk of wet weather and floodingthat have adversely impacted mines and transport routes since 2020.
However, the El Niño-driven drought in Indonesia is lowering river levels,
making it increasingly difficult to barge thermal coal to export ports.
Lithium prices have fallen further from the record peak in late 2022. Driving
the fall has been concerns about short term demand for electric vehicles
and ongoing increases in lithium supply. Export volumes of Australianlithium ores and chemicals are still expected to grow strongly over theoutlook period, with lithium hydroxide set to account for a rising share ofthose exports. The long-term outlook for lithium demand remains strong,
as does Australian lithium producers’ ability to compete.

4Resources and Energy Quarterly | December 2023

5

1.1

Summary In net terms, the outlook for Australian resource and energy commodity
exports has improved slightly since the September edition of the REQ.
The world economy has not slowed as sharply as feared a few months
ago and the Chinese Government has taken further measures tostabilise the nation’s residential property sector, maintaining demand fora range of resource and energy commodities.
 The latest forecast is for weaker growth in world demand and improving
world commodity supply to cut Australia’s resource and energy export
earnings from a record $466 billion in 2022–23 to $408 billion in 2023–
24. Another fall seems likely in 2024–25, as commodity prices soften
further and monetary policy expectations imply a stronger AUD/USD.
 Key September-quarter price developments include: higher iron ore
prices as firm Chinese demand persists, higher uranium prices on supply
problems and as countries re-evaluate nuclear power, and lower lithium
prices due to rising stockpiles and concerns about near-term EV
production/demand.

1.2

Macroeconomic, geopolitical and policy factors

The world economy is growing at a relatively slow rate
The world economy remains relatively subdued, mainly due to tightermonetary conditions adopted by most central banks over the past twenty
months. Since the last REQ, most Western central banks have kept atightening bias to cut inflation and anchor inflation expectations. Services
inflation in the West remains high, due to tightness in their labour markets.
Forecasts are for OECD economic growth to slow and labour market
tightness to ease, so that services inflation should fall, giving central banks
scope to withdraw their current restrictive monetary stance. There aresigns that China’s economic growth has steadied at relatively low levels as
Beijing rolls out more measures to stabilise China’s residential property
sector.
The relatively slow rate of economic growth in China is causing higher
unemployment — especially among young people — and deterring foreign

Resources and Energy Quarterly | December 2023

investment: with slow company sales, Chinese equities are weak, andhigh/rising interest yields in the West are also causing capital flows awayfrom China, where official rates are falling. In the September quarter 2023,
China recorded negative foreign direct investment (of US$11.8 billion) for
the first time since 1998. Nevertheless, there are pockets of strength: theChinese steel and auto sectors have proven significant sources of demand
for resource commodities in recent months. Chinese steel output has been
assisted by higher infrastructure spending in China and strong steel
exports. Chinese auto exports have risen six-fold in the past 3 years to 4.2
million a year. China recently overtook Germany as the world's 2nd
biggest car exporter.
Geopolitical developments continue to pose risks to the outlook forcommodity markets. The Hamas-Israel conflict has caused volatility inenergy markets. New sanctions on Russia over its invasion of Ukraine
would further harm its ability to produce/export resource and energy
commodities. While Europe has sourced new supplies of natural gas, theimplications for energy pricing during hot and cold seasons in the Northern
Hemisphere are not yet well understood. Government policies to drive net
zero and geostrategic interests are also having ongoing impacts on the
demand for low emission minerals and energy commodities.
Climate drivers have recently shifted. The current El Niño weather episodehas a high chance of lasting through H1 2024, and the Indian Ocean
Dipole is very high at present. Both factors suggest miners in Australia areless likely than normal to be affected by wet weather and the flooding ofmines and transport routes. But drought in Indonesia is lowering riverlevels, making it more difficult to barge thermal coal to ports used by large
cargo ships in the export trade.
The IMF expects global economic growth of 3.0% in 2023 and 2.9% in
2024, down from 3.5% in 2022. Growth in developed nations is expected
to slow from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024. Developing
and emerging market economies are forecast to grow by 4.0% in 2023 and2024. China is forecast to grow by 4.6% in 2024, down from 5.4% in 2023.

6

Risks are evenly balanced
Risks to the aggregate revenue forecasts appear evenly balanced. While
the outlook for the world economy is for relatively modest growth in theforecast period, unemployment remains low in historical terms, helping tosustain household consumption and corporate profitability. Inflation has
eased in a number of nations Unemployment may rise as the more recent
official interest rate hikes impact fully. A widening of the Hamas–Israel
conflict poses a significant risk to energy commodity and financial markets.

1.3

Export values

Australia’s export values are forecast to be $408 billion in 2023–24
The world economic slowdown and fewer supply disruptions 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.

120

480

100

400

80

320

60

240

40

160

20

80

0
2007–080
2011–12

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)

Figure 1.2: Annual growth in Australia’s resources and energy export
values, contributions from prices and volumes
45

Within the totals, energy export earnings are set to fall sharply. LNG
earnings are forecast to fall by $20 billion to $73 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.

Resources and Energy Quarterly | December 2023

Per cent

30

There is only modest change in the aggregate forecasts since September.
Resource and energy exports are forecast to be $408 billion in 2023–24,
down from a record $466 billion in 2022–23 (Figure 1.1). Weak demandand improved global commodity supply imply a fall prices, more thanoffsetting the impact of a forecast small rise in export volumes (Figure 1.2).
Export values are forecast to fall by 15% to $348 billion in 2024–25: prices
will fall but volumes will be flat.

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)

7

A$ billion

The AUD/USD has steadied in recent months. Influences include market
optimism over Chinese government efforts to stabilise China’s property
sector, and currency market expectations that the Australian-US interest
rate differential is likely to narrow. The consensus forecast adopted is for
the AUD/USD to lift over the outlook period.

Figure 1.1: Australia’s resource and energy export values/volumes

Index, 2023–24 = 100

AUD finding support

Among resource commodities, iron ore remains the largest earner by far,
forecast to earn about $131 billion in 2023–24, but fall to $102 billion in
2024–25. The sharp retracement in lithium prices is expected to seelithium exports fall from $20 billion in 2022–23 to $14 billion in 2023–24.
Export values should stabilise at around $15 billion in 2024–25.

1.4

PricesSince the September 2023 Resources and Energy Quarterly, resource andenergy prices have generally declined in US$ terms (Figure 1.3). Slower
world economic growth has overwhelmed the impact of new efforts by the
Chinese government to boost growth. Prices are likely to fall further but
remain above pre-pandemic levels as markets expect a recovery indemand — with inflation falling towards target levels overseas, central
banks (particularly the US) are expected to move away from their current
restrictive monetary policy stance.

In Australian dollar terms, the Resources and Energy Commodity Price
Index fell by 3% (preliminary estimate) in the December quarter 2023, tobe down 20% on a year ago. In US dollar terms, the index fell by 4% in thequarter, to be down 22% on a year ago. Resource export prices (in A$
terms) rose by 4% in the year to the December quarter 2023, while energy
prices fell by 36%.
Iron ore prices have lifted in recent months driven by improved market
sentiment following a series of Chinese government measures to support
growth (Figure 1.4). Chinese stockpiles are on the low side. Metallurgicalcoal prices have edged up due to concerns over tight supply. Prices
remain above pre-war levels, as some Russian supply remains strandedfrom world markets.
Figure 1.4: Bulk commodity prices
600

Figure 1.3: Resource and energy export prices, A$ terms

500
Index, June 2014 = 100

Index, December quarter 2023 = 100

175
150
125
100
75

400
300
200
100
0
Jun–1450

Jun–16Iron ore25

Jun–18

Jun–20

Metallurgical coalJun–22

Jun–24

Thermal coal

Notes: Prices are in US dollars, and are the international benchmark prices0
Jun–08Source: Bloomberg (2023); Department of Industry, Science and Resources (2023)

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 | December 2023

Energy prices remain elevated in historical terms but are continuing toease. Thermal coal prices have experienced some recent weakness due
to high inventory levels in China and Europe but are still holding well
above pre-pandemic levels. LNG prices are expected to lift slightly as theNorthern Hemisphere winter peaks. Prices should subsequently edge

8

back, with a more rapid decline when new supply from the US and Qatar
comes online in 2025. Gas/LNG markets remain more vulnerable to supply
shocks following the stranding of significant quantities of Russian output,
but strong European inventories should provide a degree of insulation.
Oil prices have declined substantially after peaking at US$98 a barrel inlate September. Strong supply from the US, Brazil and Iran is offsetting
output cuts by Saudi Arabia. Chinese imports of industrial fuels have beenstrong but this has been offset by falls in OECD demand. Lower prices
have prompted the US Administration to make plans to refill Strategic
Reserves in early 2024.

Since the last REQ, lithium prices (spodumene and lithium hydroxide)
have given up some more of the sharp gains of recent years. Lithium isentering a period of market surplus, and some producers have announced
production cuts in response to the weakness in the market and prices.
Finally, the gold price has risen since the last REQ on the back of risinggeopolitical tensions in the Middle East. In the short term, worries over the
Chinese property market could boost Chinese demand for gold.

1.5

Export volumes

December quarter export volumes rose
The Resources and Energy Export Volumes Index (preliminary estimate)rose 5% in the December quarter 2023 from the September quarter, to beup 5% on a year ago. Resource commodity volumes rose by 5% in theyear to the December quarter 2023 and energy export volumes recorded
similar gains (Figure 1.6). Better weather conditions and easing workforce
problems have driven the improvement. In volume terms, most resource
exports are likely to show only modest growth in 2024 but pick up withimproved world economic growth in 2025. High prices and the global
energy transition may hurt energy production and exports.

Figure 1.5: Base metal prices

Figure 1.6: Resource and energy export volumes

200
180
160
140
120
100
80
60
40
20
0
Jun–14120
Index, December 2023 = 100

Index, June 2014 = 100

Base metal prices remain relatively soft, due to a poor near term outlook
for construction and manufacturing in major markets such as Europe andAdvanced Asia (Figure 1.5). Nickel has been particularly weak as
Indonesian production continues to surge. Prices are expected to berelatively soft over 2024, though low inventories of most metals andincreased infrastructure-related (particular for energy) demand are
expected to constrain price falls. Prices may pick up if signs of a reboundin the world economy become evident.

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)

Resources and Energy Quarterly | December 2023

100
80
60
40
20
0
Jun–14

Jun–16Jun–18
Jun–20Resources

Jun–22
EnergyJun–24

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

9

1.6

Contribution to growth and investment

In real terms, mining output fell while the overall economy grew modestly
Australia’s real GDP rose by 0.2% in the September quarter 2023, to be
up 2.1% from a year before. Mining value-added fell by 1.0% in the
September quarter but was still 0.5% higher than in June 2022 (Figure1.7). The quarterly fall was driven by weaker Iron Ore Mining (down by
1.6% (partly due to maintenance issues), Oil and Gas Extraction (down
1.5%) and Other Mining (down by 1.2%). Coal Mining (down by 0.2%)
continues to recover from the impact on production of the La Niña weather
episode. Exploration rose by 3.5% to be up 11.8% over the year.

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$12.9 billion in the September quarter 2023, up 22% from the September
quarter 2022. In quarterly terms, investment grew for oil & gas mining and‘other mining’, which includes lithium and some other critical minerals(Figure 1.8).
Figure 1.8: Mining capex by commodity, not seasonally adjusted
18
15
12
A$ billion

Energy exports will level out in 2024, as the sharp price falls of the past
year temper production and encourage delayed maintenance to occur. An
El Niño climate episode is under way, and the Indian Ocean Dipole isstrongly positive. Both phenomena dramatically lower the chances of thetype of wet weather disruptions that hampered the production andtransportation of Australian mining products in the two years before 2023.

9
6

Figure 1.7: Contribution to quarterly growth, by sector
3

6
5

0
2013

4
Percentage points

3
2

2015

2017

2019

2021

Oil and gas extraction

Metal ore mining

Coal mining

Other mining

2023

1

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

0

Source: ABS (2023) Private New Capital Expenditure and Expected Expenditure, 5625.0-1

Expenditure for buildings and structures rose by 6% in the September
quarter, while investment in equipment, plant and machinery rose by 5%,
capping off two years of strong growth (Figure 1.9).

-2-3
Jun–14

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

Resources and Energy Quarterly | December 2023

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.

10Figure 1.10: Mining industry capital expenditure, fiscal year

5

100

20

4

80

15

3

10

2

5

1

20

0
2014
2017
2020
2023
Equipment plant & machinery (rhs)

0

0
2005

2008
2011
Buildings & structures$ billion

25

A$ billion

A$ billion

Figure 1.9: Mining industry capital expenditure by type, quarterly

60
40

2013–142015–16

2017–18
Actual

2019–202021–222023–24

Expected

Notes: Chart data is in nominal terms, seasonally adjusted.

Notes: Chart data is in nominal terms

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

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

Forward expectations suggest that total mining industry investment in2023–24 is set to rise in the near-term (Figure 1.10). The fourth estimate
for 2023–24 suggests the mining industry will invest $51 billion during thefinancial year. This is around 9% higher than the third estimate in thesurvey and more than 15% higher than the second estimate for 2023–24.
The latest data on investment among individual commodities shows ‘othermining’ (including lithium) has been sustained at relatively high levels, andthis may be driving the recent upward revisions to future spending
estimates across the mining sector.

Exploration expenditure (adjusted for inflation) rose by 6% to $1.04 billion
in the September quarter 2023. In trend terms, exploration is rising,encouraged by relatively high commodity prices and the need for minerals
vital to the global energy transition (Figure 1.11).
Industries recording significant growth in exploration expenditure include
petroleum (up by 42% in the September quarter), coal (up by 45%), andiron ore (up by 24%). ‘Other minerals’, which includes lithium, grew at a
slower rate in the quarter (up by 9%). However, this follows several
quarters of very strong growth. Exploration overall rose solidly in the
September quarter, with growth across a wide range of commodities(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.

Resources and Energy Quarterly | December 2023

11

30

2.5

24

2.0

18

1.5

12

1.0

6

0.5

A$ billion

A$ bilion

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

1.7

The forecast for Australia’s resources and energy exports in 2023–24 is$8 billion higher than the forecast contained in the September 2023
Resources and Energy Quarterly. The forecast for 2024–25 (nominal
prices) is $5 billion lower than the same report (Figure 1.13). The 2023–24
revisions have largely been driven by an upward revision to the iron ore
price and the impact of a weaker than expected exchange rate against the
US dollar (AUD/USD). The 2024–25 revisions have been driven by the
impact of a stronger forecast exchange rate.
Figure 1.13: Resource and energy exports, by forecast publication
475

475

450

450

425

425

400

400

375

375

350

350

60%

325

325

50%

300

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

Figure 1.12: Shares of exploration expenditure by commodity type80%
70%

A$ billion

00.02005 2007 2009 2011 2013 2015 2017 2019 2021 2023
Mining capex, chain volume measures
Exploration (rhs)

Shares of total

Revisions to the outlook

300
2020–2140%

2021–222022–23

2023–24

30%

Actual
Sep–23 forecast

20%

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

2024–25

Jun–23 forecast
Dec–23 forecast

10%
0%
2003

2007

Petroleum
Iron ore
Gold

2011

2015

2019

2023

Base and otber metals
Coal

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

Resources and Energy Quarterly | December 2023

12

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

Annual per cent change
2023–24 fvolumeEUV

Iron ore
LNG

A$73b
A$64b

Thermal coal

A$62b
A$52b
A$41b

Metallurgical coal













A$102b

2

4

6

2

-24

-22













-2

-19

-21

-1

-10

-12

Thermal coal
Metallurgical coal

Lithium

Crude oil

A$13b
A$14b
A$11b

Crude oil

Copper

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

CopperAlumina

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

Alumina

Aluminium

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

Aluminium

Nickel

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

Nickel

Zinc

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

Zinc

0

20

40

2022–23

A$131b

A$92b
LNG

A$20b
A$14b
A$15b

Lithium60

80

2023–24 f

value

Iron ore A$124b

Gold

A$24b
A$26b
A$21b

Gold

$A billion

A$66b

A$36b
A$29b

value

2024–25 fvolume
EUV

100

120













11

-50

-45

0

-21

-20













6

-22

-17

5

-25

-21













15

-6

8

-5

-15

-19













3

-33

-31

18

-7

10













1

4

5

-6

-12

-17













3

1

4

8

-3

5













3

3

7

4

-2

2













-1

-6

-6

1

-2

-1













7

-27

-22

14

-3

11













12

-18

-8

-2

0

-1

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 | December 2023

13

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

2021–222022–23

2023–24f

2024–25f

2021–222022–23

2023–24f

2024–25f

Resources and energy

421,691

466,310408,380

347,717

36.7

10.6

–12.4

–14.9

– realb

471,246

486,898

408,380

336,112

30.9

3.3

–16.1

–17.7

Energy204,056

238,727

180,336

151,092

151.2

17.0

–24.5

–16.2

– realb

228,035

249,267

180,336

146,049

140.5

9.3

–27.7

–19.0

Resources

217,635

227,583

228,044

196,625

–4.2

4.6

0.2

–13.8

– realb

243,211

237,631228,044

190,063

–8.3

–2.3

–4.0

–16.7

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
PricesExport volumesff

Export values, A$b
f

f

Unit

2022–23

2023–24

2024–25

Unit

2022–23

2023–24

2024–25

2022–23

2023–24f

2024–25f

Iron ore

US$/t

95

99

80

Mt

895

910

931

124

131

102

LNG

A$/GJ

21.4

17.3

15.5

Mt

82

80

78

92

73

64

Thermal coal

US$/t

302

143

126

Mt

182

202

203

66

36

29

Metallurgical

US$/t

277

259

210

Mt

156

166

174

62

52

41

Gold

US$/oz

1,831

1,933

1,851

t

228

263

250

24

26

21

Lithium

US$/t

5,174

2,535

2,250

Kt

3,311

3,408

4,031

20

14

15

Crude oil a

US$/bbl

87

86

79

Kb/d

282

284

267

13

14

11

Copper

US$/t

8,289

8,144

8,227

Kt

854

882

951

12

13

13

Alumina

US$/t

343

343

345

Kt

16,566

17,094

17,788

8.3

8.9

9.0

Aluminium

US$/t

2,333

2,248

2,381

Kt

1,440

1,429

1,444

5.3

4.9

4.9

NickelUS$/t

23,911

18,217

18,375

Kt

161

172

195

5.0

3.9

4.3

Zinc

US$/t

2,981

2,511

2,622

Kt

1,247

1,392

1,370

4.3

4.0

3.9

Uranium

US$/lb

51

77

87

t

4,809

5,441

6,167

0.8

1.2

1.5

Notes: a Export data covers both crude oil and condensate; f forecast. 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 | December 2023

14

Resources and Energy Quarterly | December 2023

15

SummaryGlobal industrial production and manufacturing activity have continued
to soften in H2 2023, due to falling goods demand in major economies.

The core outlook for global growth in 2024 has weakened slightly, withthe balance of risks surrounding the outlook remaining tilted to thedownside. As inflation returns to target levels, central banks will be able
to adopt less restrictive stances, allowing growth to pick up in 2025.

Despite better-than-expected growth in the September quarter 2023,
key downside risks challenge China’s growth outlook, including ongoingissues in the real estate sector.

2.2World 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 2023 and 2.9% in 2024, with growth then rising to 3.2% in2025 (Figure 2.1). Compared to the July 2023 World Economic Outlook,this represents a downgrade of 0.1 percentage points for 2024 but nochange for 2023 and 2025.
Over the next couple of years, the IMF continues to expect a notabledivergence to emerge between the performance of Advanced andEmerging economies. The US economy has surprised on the upside withresilient consumption and investment this year, however European
economies appear to have slowed substantially in 2023 under the weightof tighter monetary policy.
Weaker consumer demand for goods relative to services over the past
year in the US and Europe has weighed on the economic growth of
manufacturing exporters — including China, Japan and Korea. Demand
for services now also looks to be also weakening, with manufacturing in a
prolonged slowdown, suggesting a slowing of global growth over theremainder of the year and into 2024.
After recording growth below the global average in 2022, the IMF expects
China’s economy to grow by 5.4% in 2023. Due to stronger-than-expected

Resources and Energy Quarterly | December 2023

growth in the September quarter 2023 and recent policy announcements,
the IMF issued a 0.4 percentage point upgrade to China’s growth outlook
in November to 4.6% in 2024.
While global growth forecasts were only revised marginally from the July
update, the IMF stated the balance of risks is less negative than it was in
April, however it is still tilted to the downside.
Headline and core inflation measures have continued to moderate in mosteconomies in recent months, but they remain above central bank targets,as do near-term inflation expectations. There is a risk that ongoing labour
market tightness and further drawdown of excess savings in some nations
could see inflation fail to return to central bank targets, or even rebound.
This would lead to monetary policy staying restrictive, constraining
economic growth.
An additional risk to global growth the IMF has emphasised is the potential
for China’s economic recovery to disappoint, or its financial stability toworsen if the property downturn continues.
Figure 2.1: GDP growth forecasts
6
5
Annual per cent change

2.1

4
3
2
1
0

World

China
2022 2023

United States
2024 2025

Euro Area

Source: IMF (2023)

16

Additional sources of global economic vulnerability include possible
escalations of the wars in Ukraine and the Middle East, geopoliticalfragmentation and increasing trade restrictions.

Forward indicators of manufacturing activity continue to indicate a
prolonged contraction. The JP Morgan Global Manufacturing Purchasing
Managers Index (PMI) was 48.8 in October 2023, and has remained incontractionary territory (less than 50) since September 2022.

Global industrial production and trade weaken as demand remains low
Global industrial production (IP) increased in the September quarter 2023
by 0.4% year-on-year (Figure 2.2). Positive annual growth largely reflects
China’s economic rebound following COVID-related declines through the
middle of 2022. Growth remained weak overall due to continued
contraction in the industrial sectors of Europe and Advanced Asia. Highenergy prices and tighter monetary policy contributed here.
Global merchandise trade volumes declined in the September quarter
2023 to be 3.6% lower year-on-year (Figure 2.2). Weaker demand forgoods in advanced economies, especially electronic equipment, hasdriven exports from Japan, Republic of Korea and emerging Asia lower
year-on-year.

Inflation pressures gradually easing while new risks emerge
Headline inflation measures have continued to decline over recent months
in many major economies; however, progress to return inflation to target
levels has been slowed by persistence in core inflation measures andrecent strength in energy commodity prices.

57.5

20%

55.0

10%

52.5

0%

50.0

-10%
Oct-20

Apr-21 Oct-21 Apr-22
Industrial production
Manufacturing PMI (rhs)

US headline inflation measured 3.2% in October 2023, falling from a
recent spike of 3.7% due to lower energy prices and slowing growth infood and services (Figure 2.3). US core inflation — which excludes foodand energy — declined to a 2-year low of 4.0% in October 2023, withmonthly price growth of only 0.2% supporting hopes of further disinflation.
Index

Annual percent change

Figure 2.2: World industrial production, trade and PMI
30%

47.5
Oct-22 Apr-23 Oct-23
Merchandise trade

Notes: PMI data is up to October 2023; IP and trade data only available to September 2023.
Source: Bloomberg (2023); CPB Netherlands Bureau for Economic Policy Analysis (2023)

Resources and Energy Quarterly | December 2023

Global manufacturing activity has continued to decline through H2 2023
due to weakening activity in Asia and a sharp downturn in the European
manufacturing sector. Global manufacturing orders declined in October,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. Optimism among
manufacturers dropped to an 11-month low in October, with weak demandleading to cutbacks in employment, purchasing and inventory indices.

Eurozone inflation declined notably in October 2023 to 2.9%, its lowest
since July 2021. Headline inflation has declined consistently throughout
2023 due largely to falling energy prices, with energy price deflation
reaching 11% in October 2023. Recent decreases in headline inflation
have also come from slowing core inflation. Eurozone core inflation
declined to 4.2% in October 2023, having persistently held above 5% from
October 2022 to August 2023.
The Israel‒Hamas conflict and the potential for escalated geopoliticaltensions in the Middle East present future upside risks to inflation throughenergy commodity prices. Disruption to shipping routes in the region (such

17

2.3

Figure 2.3: Consumer Price Indices — US, Europe and OECD

The outlook for Australia’s major trading partners remains weak, with their
GDP growth in 2024 and 2025 forecast by the RBA to be around 3.1%,
well below its pre-pandemic decade average and lower than the August2023 forecast. Slower growth in Australia’s major trading partners is
expected to reduce demand for Australia’s exports. With that said, the IMF
expects a recovery in China’s economy and ongoing development in India
to contribute about half of global economic growth this year. Growth fromthese key markets should support growth in their trade partners’
economies, underpinning Australian resource and energy export earnings
over the outlook period.

12
Annual percentage change

Major trading partners’ economic outlook

10
8
6
4
2

China’s recent growth exceeded expectations, but risks remain0-2
Oct 19Oct 20US Energy
US Goods (Ex Food & Energy)
Euro Area (Headline)

Oct 21

Oct 22

Oct 23

US Food
US Services (Ex Food & Energy)OECD (Headline)

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

as the Suez canal) also presents a risk to global shipping prices and byextension, global goods price inflation. This would compound current
backlogs building up around the Panama Canal, where shipping
throughput is being reduced by low water levels.
In October 2023, the IMF forecast global inflation would fall from 8.7% in
2022 to 6.9% in 2023 and 5.8% in 2024. Compared to the July 2023
outlook, the forecast for 2023 was revised up marginally, while the forecast
for 2024 was revised up by 0.6 percentage points, higher-than-expected
core inflation.
Inflation is expected to decline more quickly in advanced economies due
to tighter monetary policy and the lower exposure of these economies tocommodity price and exchange rate shocks.

Resources and Energy Quarterly | December 2023

China’s economy grew by 1.3% in the September quarter 2023, with GDP
4.9% higher year-on-year (Figure 2.4). Strong consumption growth was
the key driver of China’s economic growth over the quarter, supported to alesser extent by continued investment in infrastructure and manufacturing.
While the rebound in consumption demand appeared to fade through the
middle of 2023, recent indicators point to a strengthening in consumption,
particularly in services. The official index of services production increasedby 7.7% year-on-year in October 2023, led by growth in accommodationand food services (21%), transport (13%) and wholesale or retail trade(10%). Retail sales rose in October 2023 by 7.6% year-on-year, exceeding
market expectations.
China’s consumer price inflation once again fell below zero in October
2023, with year-on-year declines in energy and food prices, outweighing
price growth in services, where consumer demand has been directed.
China’s core inflation — which excludes food and energy prices — wasstill below policy targets at 0.6% year-on-year in October.
Year-to-date fixed asset investment increased by 2.9% year-on-year in
October 2023, underpinned by 5.9% growth in infrastructure and 6.2%
growth in manufacturing investment. Particularly strong growth wasreported for investment in high-tech manufacturing (such as aerospace)18

Figure 2.4: China – contributions to quarterly real GDP

driven by reduced foreign demand and falling growth in overall sales.
Business sentiment fell to its lowest since September 2022, due toconcerns about the global outlook.

Annual percent change

20

The property sector downturn has continued to act as a drag on China’s
economic activity, with conditions remaining weak through H2 2023. New
property starts (by floor space) were on average 25% lower year-on-yearfrom July-October 2023. Sales in large cities have recovered slightly — inline with monetary and fiscal policy easing — however this has not passed
through to investment in smaller cities where most new home sales occur.

15
10
5
0
-5

Mar-21

Sep-21
Consumption

Mar-22

Sep-22

Investment

Net exports

Mar-23

Sep-23GDP

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

and high-tech services (such as science and technology R&D). Overall
investment growth continues to be weighed down by weakness in theproperty sector, with year-to-date residential investment declining by 9.3%
year-on-year.
China’s industrial production increased by 4.6% year-on-year in October
2023, the strongest rate since April 2023. Growth was driven by year-onyear increases in manufacturing output (5.1%), mining output (2.9%) andutility output (1.5%) such as energy and water. Output growth wassignificant for key strategic products such as solar cells (63%), service
robots (59%) and integrated circuits (35%).
The Caixin Manufacturing Purchasing Managers’ Index (PMI) fell to 49.5 in
October, signalling the sector’s return to contraction following two monthsof expansion. Weak conditions were reported, with declining output being
1

Continued weakness in the property sector is compounded by ongoing
financial stability concerns. According to the RBA 1, more than half of large
private developers in China have defaulted and many others are likely tofind it difficult to meet upcoming debt repayments, given stringent financial
conditions. Country Garden — one of the largest private property
developers in China — is seeking debt restructuring after defaulting on a
US dollar bond in October.
Chinese authorities have further loosened policy to stabilise the property
sector and support the announced 2023 GDP growth target of 5%. In
addition to continued monetary easing (such as reductions in mortgage
lending rates and reserve requirement ratios), the People’s Bank of China(PBoC) introduced lower mortgage down payment requirements in August.
Targeted interest rate reductions on outstanding first-home mortgages(estimated to account for half of all housing loans) are likely supporting
household consumption.
In October, authorities announced CNY1 trillion in central government
bond issuance to be transferred to local governments and spent in 2023
and 2024 —likely targeted towards infrastructure. Concerns have also
been raised regarding local government debt levels, with financing limits
and refinancing quotas allocated by authorities to aid repayments of local
government financing vehicles.

RBA Statement on Monetary Policy November 2023

Resources and Energy Quarterly | December 2023

19

Japan and Republic of Korea slowing due to weaker external demand
Japan’s GDP fell by 0.5% in the September quarter 2023, although it was
still 1.4% higher year-on-year due to base effects in the September quarter2022. Depreciation of the Yen in the September quarter 2023 contributed
to a 10% quarter-on-quarter decrease in net exports.
Private consumption — which accounts for 53% of GDP — fell year-onyear and tracked flat on the previous quarter, as cost of living pressures
have weakened consumers’ real wages and consumer confidence has
weakened over the second half of the year.
Slowing growth in Japan’s major trading partners is a key issue for its
economy, particularly its industrial sector. Japanese industrial production
was down by 3.4% year-on-year in September 2023 (Figure 2.5).
Machinery orders have, on average, decreased at an annual rate of 6.4%
since October 2022. The Jibun Bank Japanese Manufacturing PMI
improved, but remained in contraction at 48.7 in October, marking
9 months of contraction so far in 2023. Weakening demand both
domestically and externally also led to declines in new orders and output.
Japan’s core inflation — which excludes fresh food but includes fuel costs— was 2.8% in September 2023, still exceeding the Bank of Japan (BoJ)
inflation target of 2%, but down sharply from 4.2% in January. Supporting
expectations for cost pressures to ease further, Japan’s wholesale inflation
fell to 0.8% in October 2023, having peaked at around 11% in December
2022. The BoJ has maintained its accommodative monetary policy andResources and Energy Quarterly | December 2023

500

130

400

120

300

110

200

100

100

90

0
2013

2015

2017

Vehicle exports

2019

2021

2023

Index

Figure 2.5: Japan industrial production and vehicle exports

Thousand vehicles

The IMF released updated projections for the Chinese economy in
November, revising up their growth forecasts by 0.4 percentage points on
account of recent policy announcements and stronger-than-expected GDP
growth in the September quarter. The IMF forecasts Chinese GDP growthof 5.4% in 2023, reflecting rebounding consumption compared with
COVID-related disruptions in 2022, as well as continued investment ininfrastructure and manufacturing. The IMF forecasts growth to decline to4.6% in 2024 due to continued weakness in the property sector and weakexternal demand. Growth is then forecast to slow further to 4.1% in 2025,
in line with a long-term trend towards structurally lower growth.

80

Industrial production (rhs)

Source: Bloomberg (2023)

continues to target the 10-year Japanese Government Bond yield at 0%.
The IMF expects Japan’s economic growth to rise to 2.0% in 2023, a 0.6
percentage point upgrade from July, driven by pent-up demand, a surge in
inbound tourism, and accommodative fiscal and monetary policy. Japan’s
growth in 2023 has also been supported by a strong rebound in vehicle
exports as supply chain issues have eased (Figure 2.5). As the effects ofpast stimulus efforts fade, Japan’s economic growth is expected to slow to
1.0% in 2024, before slowing further to 0.7% in 2025.
The Republic of Korea’s GDP grew by 1.2% year-on-year in the
September quarter 2023. Annual growth was primarily driven by
3.1% year-on-year growth in exports which, combined with imports
tracking flat, led to a 26% expansion in the country’s trade balance.
Korea’s industrial production increased in September 2023 to be
3.0% higher year-on-year, the first annual growth recorded since
September 2022 (Figure 2.6). Monthly growth of 1.8% exceeded market
expectations (of a 0.9% decline) and was driven by an unexpected20

In October, the IMF forecast the Republic of Korea’s economic growth to
weaken from 2.6% in 2022 to 1.4% in 2023, driven by muted external
goods demand, particularly for semiconductors. Beyond this, growth isforecast to increase to 2.2% in 2024 and 2.3% in 2025. The IMF noted thatthe downturn in the technology cycle and global goods demand is
expected to act as a drag on Korea’s growth momentum in the short-term.
Resilient US labour market and strong investment supporting growth
The US economy grew by 2.9% year-on-year in the September quarter
2023, driven by stronger-than-expected quarterly growth of 1.2%. This
growth was driven by personal consumption of goods and services. While
goods consumption growth has remained weak in real terms since early2022 (countered by strong growth in services activity), it began tostrengthen again in the September quarter 2023 (Figure 2.7).
US labour market resilience and remaining savings buffers 2 havecontinued to support strong consumption. However, signs have emergedthat the labour market is softening. The unemployment rate rose to 3.9%
in October 2023, the highest (albeit still low) rate since January 2022.
Employment growth has slowed further over H2 2023, with nonfarm payroll
employment rising by 150,000 in October 2023 — below the average rise

2

50%

55.0

25%

52.5

0%

50.0

-25%

47.5

-50%
Sep-21
IP

Mar-22

Exports

Sep-22Mar-23

Semiconductor exports

Sep-23

Index

Korea’s manufacturing PMI declined slightly in October to 49.8, remaining
in contraction territory for a 16th consecutive month. The negative result
was due to small declines in output and new orders, continuing to be
driven by subdued economic conditions (domestically and internationally).
Input price inflation increased to its strongest since December 2022 due toraw material prices and currency weakness. Despite this, expectations forthe year-ahead production outlook improved over the month due toslowing declines in output and new orders.

Figure 2.6: Republic of Korea industrial activity and exports

Annual percent change

turnaround in semiconductor output. Exports of semiconductors declined
by only 3.1% year-on-year in October 2023, following a prolonged decline
which commenced in August 2022 (Figure 2.6).

45.0

Manufacturing PMI (rhs)

Source: Bloomberg (2023)

of about 258,000 over the past 12 months. Wage growth has also eased
further, down from 7.1% in June 2023 to 2.3% in September 2023.
Combined with declining US inflation (both headline and core) and a sharp
rebound in US labour productivity growth in the September quarter 2023 to2.2% year-on-year, this has reduced expectations that further monetary
tightening will be necessary. This recently resulted in lower US Treasury
yields and a weaker US dollar, from elevated levels in October 2023.
US industrial production rose by 0.1% year-on-year in September 2023,
driven by a 0.4% year-on-year rise in manufacturing output. The US
Manufacturing PMI stayed in contractionary territory at 46.7 in October,marking a year of continuous contraction for the sector. The continued
deterioration in manufacturers’ operating conditions reflects increasingly
sharp falls in new orders as both domestic and external demand weaken.

Barbiero & Patki 2023, “Have US households depleted all the excess savings they accumulated during the pandemic?”, Federal Reserve Bank of Boston, November 2023.

Resources and Energy Quarterly | December 2023

21

Eurozone economies face slower growth, manufacturing downturn

6000

10500

5000

9500

4000

8500

3000

7500

2000
2013

2015

2017

Goods consumption

2019

2021

2023

US$ billion, 2012 prices

US$ billion, 2012 prices

Figure 2.7: Real US consumption of goods and services

6500

Services consumption (rhs)

Notes: Consumption data is monthly, reported in annualised terms.
Source: Bloomberg (2023)

A notable source of growth has been private non-residential investment,
which rose by 3.7% year-on-year in the September quarter 2023 in realterms. US private investment in manufacturing structures rose in realterms by 66% year-on-year in the same period, driven by sharp growth incomputers, electronics and electrical manufacturing. Policies such as theInflation Reduction Act and the CHIPS & Science Act have provided strong
incentives for investment into clean energy and semiconductor
manufacturing in the US since their inception in August 2022.
In October 2023, the IMF upgraded its forecast for US economic growth in2023 by 0.3 percentage points to 2.1% due to resilient consumption andongoing labour market tightness. Growth is then forecast to ease to 1.5%
in 2024 — a 0.5 percentage point upgrade — as tight monetary policy andthe elimination of excess savings slow private consumption. This is
expected to reduce labour market tightness and moderate wage growth.
The IMF expects the US unemployment rate to reach a peak of 4.0% in
the December quarter 2024 — a 1.2 percentage point downgrade from
April — consistent with a softer landing than previously expected.

Resources and Energy Quarterly | December 2023

Eurozone GDP growth was -0.1% over the September quarter 2023,
bringing annual GDP growth to 0.1% year-on-year. This was theEurozone’s first quarterly contraction since the 2020–21 recession. Amongthe larger economies Spain grew by 0.3% over the quarter, France grew
by 0.1%, while Italy’s quarterly growth was approximately zero. Germany’s
economy contracted over the quarter, to be down 0.3% year-on-year.
In August 2023, the Eurozone Composite PMI Index decreased to 46.5,
signifying the worst slump in private sector activity since November 2020
(Figure 2.8). The fifth consecutive month of decline reflected a further
deterioration in manufacturing conditions and the contraction of theservices sector for the second time in three months.
Industrial production in the Eurozone declined by 5.1% year-on-year inAugust 2023, led by a 4.9% year-on-year decline in manufacturing
production. Industrial production in major producer Germany was down in
September by 3.7% year-on-year. This resulted from a 1.4% decline
month-on-month, the fourth contraction in as many months. Significant
monthly output declines were reported for Germany’s auto sector (-5%)
and electrical equipment (-4.4%). The Eurozone manufacturing PMI
recorded a reading of 43.1 in October 2023, with declines in output, neworders, employment and purchasing activity. The PMI survey reported thefastest reduction in factory employment levels since August 2020.
Germany’s manufacturing sector continued its deep contraction with a PMI
reading of 40.8 in October. This reflected a continued deterioration indemand, with customers reportedly destocking and holding back on
investments against a backdrop of uncertainty and high interest rates.
In its October update, the IMF forecast Euro Area growth to be lower thanpreviously expected: at 0.7% in 2023 and 1.2% in 2024. With the IMF now
projecting a near-completion in the recovery of the region’s services
sector, growth forecasts in services- and tourism-driven economies (suchas France and Spain) were kept steady or revised a touch lower. The
weak outlook for manufacturing resulted in a downgrade to growth inGermany (now -0.5% in 2023).
22

Figure 2.8: Eurozone composite and manufacturing PMIs

Exchange rate assumption revised lower
Over the past quarter, the Australian dollar fell both relative to the US
dollar and in trade-weighted terms (Figure 2.9). In the December quarter,
the Australian dollar has been supported by expectations the USAustralian interest rate spread could narrow, as well as market optimism
over Chinese government efforts to stabilise the country’s property sector.

Index

50
40
30
20
10
0
Sep-20Mar-21

Sep-21

Mar-22Europe Composite PMI
Germany manufacturing PMI

Sep-22Mar-23

Sep-23

Europe manufacturing PMI

Source: Bloomberg (2023)

India’s GDP growth to be relatively resilient
India’s GDP growth was 7.6% year-on-year in the September quarter
2023, a slight decrease from 7.8% in the June quarter. This annual growth
figure was above market expectations, driven by continued strength in
fixed capital formation, as well as private consumption expenditure. India’s
manufacturing PMI remained expansionary in October 2023, but 2 points
lower month-on-month at 55.5. Slower growth was reported in output andnew orders, with manufacturers reporting the lowest new order growth inover a year. Combined with an acceleration in input price growth, surveyed
firms’ sentiment fell to a five-month low.
The IMF forecasts India’s economic growth to slow to 6.3% in 2023,
revised up from 6.1% in July due to stronger-than-expected consumption
in the June quarter 2023. Growth is expected to remain steady at 6.3% in
2024. From 2024 onwards, household spending is expected to pick up aspressures from inflation and monetary policy ease.

The AUD/USD exchange rate assumption has been revised marginallylower; by US$0.03 in 2024 and by US$0.01 in 2025 compared with theSeptember 2023 Resources and Energy Quarterly. Assumption
adjustments were made in line with changes in market consensus(surveyed by Bloomberg) on the exchange rate outlook. The Australian
dollar is expected by markets to appreciate against further the US dollar
over the outlook period as interest rates increase further in Australia andinterest rate cuts commence in the United States. The median consensus
on 5 November 2023 for the AUD/USD exchange rate was an average of
US$0.64 during the December quarter 2023, US$0.67 in the first ninemonths of 2024 and US$0.73 in 2025.
Figure 2.9: Australian trade-weighted index and AUD/USD
70

0.9

65

0.8

60

0.7

55

0.6

50
2018

2019

2020
2021
AUDUSD (rhs)

2022
2023
AUSTWIUS$

60

Index (May 1970 = 100)

70

0.5

Source: RBA (2023)

Resources and Energy Quarterly | December 2023

23

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

2023a

2024a

2025a

3.5

3.0

2.9

3.2

China c

3.0

5.4

4.6

4.1

Japan

1.0

2.0

1.0

0.7

Republic of Korea

2.6

1.4

2.2

2.3

Indiad

7.2

6.3

6.3

6.3

ASEAN-5e

5.3

4.9

5.3

5.2

Eurozone

3.6

0.7

1.5

2.1

United States

2.1

2.1

1.5

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); Bloomberg (2023)

Table 2.2: Exchange rate and inflation assumptions

AUD/USD exchange rate

2022

2023a

2024a

2025a

0.69

0.66

0.68

0.72

8.0

4.1

2.8

2.4

2021–222022–23a

2023–24

2024–25a

4.4

7.0

4.4

3.5

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 | December 2023

24

Resources and Energy Quarterly | December 2023

25

Resources and Energy Quarterly | December 2023

26

SummaryGlobal steel demand remains weak, driven by lower demand frommanufacturing and construction in developed economies and ongoing
weakness in China’s property sector.

World steel production fell 4.6% (quarter-on-quarter) in the September
quarter 2023. An expected stabilisation and gradual pickup in global
industrial production, combined with further stimulus-related
infrastructure projects, should support stronger growth in steel demandin 2024.



3.2

World steel production is projected to reach just under 2 billion tonnes
by the end of the outlook to 2025. Growth will be supported by new
capacity — either underway or planned — with projects in the pipeline
in Asia, North America, Europe and the Middle East.

World production and consumption

Global steel production falls again in the September quarterIn the September quarter 2023, global steel output reached 461 million
tonnes. This represented a decline of 4.6% (22 million tonnes) from theJune quarter 2023 but was around the middle of the range tracked in the
2017-2021 period, and above the September quarter 2022 (Figure 3.1).
Despite weaker steel production in recent months, world steel output is
expected to record year-on-year growth of 1.6% in 2023. Global steel
production was particularly weak in the second half of 2022. Chinese
production last year was heavily affected by outbreaks of the COVID-19
pandemic and ongoing weakness in the nation’s residential property
sector. Higher energy prices also forced output cuts amongst large steel
makers, such as the EU, US, and Japan.
Demand from exporters of manufactured products as well as someinfrastructure investment, has helped offset the impact on steel ofprotracted weakness in Chinese property demand. While weak profitability
amongst the majority of Chinese steel mills continues to weigh on the
sector, the lack of strict enforcement of government steel production caps
so far this year is supporting iron ore prices.

Resources and Energy Quarterly | December 2023

Figure 3.1: Global monthly steel production
180
160
Million tonnes

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)

Subdued demand resulting from monetary policy tightening by major
Western central banks over the past year is acting to dampen economic
growth, and consequently demand for steel, across most major economies(ex China). An expected stabilisation and gradual pickup in growth inglobal industrial production next year, combined with further stimulusrelated infrastructure projects, is expected to support stronger growth insteel demand over the rest of the outlook period.
World steel production is projected to grow by 1.6% in 2024 and 1.4% in
2025, to reach just under 2 billion tonnes by the end of the outlook period.
Growth in world steel production over the period to 2025 will be supported
by growth in new capacity — either underway or planned — with projects
in the pipeline in Asia, North America, Europe and the Middle East.
Global industrial production expected to recover in 2024 and 2025
Growth in global industrial production — a key driver of steel consumption— is expected to see a mild recovery after a weak 2023. Global industrial
production growth was 0.4% year-on-year in August, down from over 3%
in the second half of last year (Figure 3.2). This will likely further dampen27

Global automotive sales are expected to remain modest in 2024. The
Economist Intelligence Unit forecasts a 3.0% increase (year-on-year) in
new vehicle sales in 2024, with a return to pre-pandemic production levels
not expected until 2025. A number of factors are expected to constrain
sales, including weak global economic growth, elevated living costs andrelatively high interest rates. S&P Global Mobility notes that thesemiconductor supply chain crisis, which severely hampered automotive
production in 2022, now appears to have largely passed.
China’s property sector headwinds continue
After protracted weakness over the past two years, China’s property sector
is yet to stabilise. Following a pickup in early 2023, new home sales were
down 20% year-on-year in September, and floor space under construction
was down 7.6% (Figure 3.3). Fixed asset investment was down 3.9% yearon-year in October, a halving in the fall registered in September and a rare
positive sign amidst China’s multi-year property decline.
So far, property sector stresses have been contained, but potential for spillover to other areas of China’s financial system remains. Property sector
instability has triggered concern from potential home buyers about thepossibility that other developers could default. Confidence among
homebuyers will take time to stabilise and remains a key downside risk
which could undermine government efforts to stimulate property demand.
Resources and Energy Quarterly | December 2023

20%

70

15%

65

10%

60

5%

55

0%

50

-5%

45

-10%

40

-15%
2019

2020

2021

World steel production

2022

World IP

2023

PMI reading

75

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)

Figure 3.3: China’s residential property sector pipeline
40

80

30

60

20

40

10

20

0

0

-10

-20

-20

-40

-30
2019

2020

2021

2022

2023

-60

Annual percentage change

Global manufacturing activity remained weak over H2 2023, with the JP
Morgan Global Manufacturing PMI reading at 49.3 in November. This was
the 15th successive reading in ‘contractionary’ territory.

25%
Annual percentage change

Global construction activity continues to register modest growth although
there are substantial regional disparities. With private sector residential
and commercial activity dampened by tighter credit conditions, global
construction continues to be driven primarily by infrastructure. The Middle
East and African regions registered the strongest conditions in the
September quarter, followed by the Americas and India. Meanwhile activity
continued to deteriorate in a Europe.

Figure 3.2: World manufacturing PMI, IP and steel output

Annual percentage change

global steel demand for the remainder of 2023. Global steel consumption
is projected to grow by 1.7% in 2023, following a fall of 2.6% last year.

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

28

China’s steel output fell in the September quarter, though remained above
2022 lockdown-affected levels (Figure 3.4). Average Chinese steel mills’
profit margins turned negative again in September due to weak steel
prices and high raw material and energy prices. In November, about 75%
of Chinese steel mills were estimated to be operating at a loss, raising thepossibility of mills having to cut output in coming months.

Figure 3.4: China monthly steel production
11090Infrastructure spending is expected to provide some support to China’s
economy over the outlook period. At the end of October, the government
approved the issuance of an extra 1 trillion yuan worth of sovereign bonds
in 2023. Legislators also renewed authorisations to frontload some local
government bond issuance in 2024. In November, reports indicated afurther 1 trillion yuan of low-cost financing will be made available to
China’s urban village renovation and affordable housing programs.
Despite monetary policy easing over 2023, there is yet to be a meaningful
pick up of credit growth in the broader economy. Bloomberg’s China’s
Credit Impulse (measuring new loans compared with broader GDP)remained in negative territory in September for the fifth consecutive month(Figure 3.5). Nevertheless, the lags involved in some of the policy changes
may help underpin Chinese commodity demand in 2024.

80
70
60
50

Chinese government introduces new fiscal stimulus to support growth

Jan

Feb MarApr May Jun

2017-2021 range

Jul

Aug Sep

2022

Oct

Nov Dec

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

China’s steel sector has been supported by strong growth in exports,
partly offsetting the effects of property sector weakness. Chinese steel
exports were up 53% year-on-year in October, down from 62% inSeptember. Chinese infrastructure investment is also supporting steel
demand, up 6.1% in the September quarter 2023. Overall, China’s steel
production in 2023 is expected to be 1.1% higher than in 2022.
The extent to which the Chinese Government enforces restrictions on steel
production levels over the final weeks of 2023 remains uncertain. To date,
production cuts have not been strictly enforced as the government
prioritises economic growth. However, some slowing in Chinese steel
output is expected as 2023 ends, to comply with emission controls and tomatch a seasonal drop in demand.
Resources and Energy Quarterly | December 2023

Figure 3.5: China credit impulse

2023

25
Annual percentage change

Million tonnes

100Over the rest of the outlook period to 2025, China is projected to see amild fall in steel production, with zero growth projected in 2024 and a fall of
0.6% in 2025.

20
15
10
5
0
-5
-10
-15
2009

2011

2013

2015

2017

2019

2021

2023

Source: NBS (2023); Bloomberg (2023)

29

Falls in ex-China steelmaking due to high energy costs and weak demand
Global steel production (excluding China) was around 205 million tonnes
in the September quarter 2023. This represented a fall of 3.7% from theprevious quarter but was 2.2% higher than the comparable period in 2022.
Over the first ten months of 2023, total steel output reached around 693
million tonnes, a 1.8% fall in year-on-year terms (Figure 3.6).

Figure 3.6: Monthly steel production – ex-China global
80

Million tonnes

European construction sector weakens in the December quarter
Weakening demand amid the European Central Bank’s aggressive
monetary policy tightening cycle saw the Eurozone construction sector
slide deeper into contraction in the December quarter 2023. The HCOB
Eurozone Construction PMI fell for an 18th consecutive month in October,to reach 42.7. This fall was also the sharpest in 2023.
Downturns were evident in all three construction subsectors (housing,commercial and infrastructure). Residential construction recorded thebiggest fall, but commercial and infrastructure construction also declined.
While new orders declined at a softer pace than in previous months theongoing downward trend points to further weakness in business conditions
extending well into 2024. Input prices picked up in October but remain well
below those seen earlier in the year, reflecting reduced demand for inputs
and greater material availability.

75

70

65

60

have picked up slightly in recent months following the large falls over2023. The substantial price differential between US rebar prices and othermarkets widened in October (Figure 3.8).

Jan Feb Mar Apr May Jun

Jul

2016-2019 range

Aug Sep Oct Nov Dec

2022

2023

Notes: Monthly production reporting provides data on 61 countries (excluding China) andaccounted for approximately 98% of total world crude steel production in 2022.
Source: World Steel Association (2023); DISR (2023)

Higher energy and input costs, as well as moderating global demand,
continue to impact manufacturing activity across major economies.
Industrial production has been particularly weak in the EU and Japan
during 2023. However, South Korea’s industrial production has begun torecover after substantial falls last year (Figure 3.7).
Global steel prices remained weak in the December quarter, particularly in
China and Southern Europe, for both reinforcing bar (‘rebar’) and flat steel
products such as hot-rolled coil (HRC). US prices for HRC, by contrast,
Resources and Energy Quarterly | December 2023

Slowdowns in construction activity were steepest in Germany and France,with German construction firms recording the largest fall in activity since
early 2020. Italy, by contrast, recorded growth in output fuelled by growthin housing, commercial building and civil engineering.
While the European economy has shown surprising resilience to date in
the face of the energy crisis created by the Russian invasion of Ukraine,high energy costs and interest rates continue to take their toll on
manufacturing activities. Germany has been hit particularly hard, facing
both a manufacturing recession and a housing crisis.
EU steel output fell by 9% year-on-year in the first nine months of 2023
(and remained 16% below pre-COVID 2019 levels). 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 their 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 theshift toward EAF-based, lower-emissions facilities.
30

Indian steel output reached 116 million tonnes in the ten months to
September 2023, a rise of 12% year-on-year (Figure 3.9). Total production
is forecast to grow 9.6% in 2023 (to 137 million tonnes).
India’s economic outlook remains stable in the face of a high interest rateenvironment, with demand for steel expected to maintain its high growth
momentum driven by the manufacturing and construction sectors. India’s
manufacturing PMI fell in October, but remained strongly positive, withsteady growth reported in output, new orders and foreign sales.
India is projected to see some of the strongest growth in steel output
globally over the outlook period (Table 3.1). Substantial new steel
production capacity is expected to be added over the next few years, with
the Government targeting a doubling in capacity by the end of the decade.

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

Annual percentage change

10%

A considerable increase in total steel output is also expected in South-East
Asia, 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.

Figure 3.8: Rebar steel prices
1,200
1,000
US$ per tonne

India’s steel demand expected to continue growing strongly

800
600
400
200
0
2019

5%

2020
US

2021
China

2022
2023
Southern Europe

Source: Bloomberg (2023)

Japan and South Korean steel output remains subdued

0%Japanese steel output was about 22 million tonnes in the September
quarter 2023, down 1.2% year-on-year. Rising costs and labour shortages
are dampening growth in construction activities, but manufacturing steel
demand is expected to show moderate growth in both 2023 and 2024,
helped by the recovery of automotive production. Over the outlook period
to 2025, Japan’s steel production is expected to be flat (Table 3.1).

-5%
-10%
-15%
Dec-2021
EU

Jun-2022
US

Dec-2022

Jun-2023

Japan

South Korea

Source: Bloomberg (2023)

Resources and Energy Quarterly | December 2023

South Korea’s economy remains subdued, with GDP growth of just 0.6%
year-on-year in the September quarter. However, domestic industrial
production increased in September for the first time in a year. Ongoingrecovery from flood damage in 2022 and modest growth in construction
after years of contraction is expected to support steel demand into 2024.
After remaining flat over 2023, South Korean steel output is forecast to
grow modestly over the outlook period (Table 3.1).
31

US commercial building counteracts weak residential construction
US steel production has been relatively weak so far this year. In the firstten months of 2023, production was down 0.8% compared with thecorresponding period in 2022. This result reflects slowing industrial
production, which has steadily deteriorated: from growth rates of 3-4% in
2022 to only 0.1% year-on-year in September 2023. Tightening monetaryconditions have also weighed on US construction, particularly residential
property. But the commercial building sector has recorded robust growth inpart due to reshoring activities.

The outlook for US steel demand in 2024 contains downside risks. The
lagged effect of tight monetary policy and higher land and material costs
point to headwinds for residential construction in 2024. The outlook for
manufacturing is flat, with the US Manufacturing PMI recording a neutrallevel of 50 in October. While new orders increased for the first time in six
months, work backlogs shrank and employment levels fell for the first timein over 3 years.
US steel production is projected to record moderate growth over theoutlook period to 2025 (Table 3.1).

Figure 3.9: 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

BrazilOctober year-to-date actual

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

Resources and Energy Quarterly | December 2023

32

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

Annual percentage change

2022

2023 s2024 f

2025 f

2023 f

2024 f

2025 f

China

965

984

983

978

2.0

0.0

-0.6

European Union

159

153

158

162

-4.0

3.8

2.0

India

118

126

136

146

7.6

7.4

7.3

United States

102

102

103

107

-0.8

1.6

3.3

Other Asiaa

114

119

125

127

4.3

5.2

2.2

Japan

62

61

61

62

-1.6

0.7

1.4

Middle East

56

56

57

59

-1.3

2.7

3.2

South Korea

54

55

56

57

3.5

1.1

1.4

Russia

43

45

45

45

4.9

-0.2

1.0

World steel consumption

1,895

1,927

1,962

1,990

1.7

1.8

1.4

Crude steel production

2022

2023 s2024 f

2025 f

2023 f

2024 f

2025 f

1,018

1,030

1,022

1,016

1.1

-0.7

-0.6

European Union

136

127

133

133

-6.4

4.0

0.7

India

125

137

145

154

9.6

6.0

6.2

Japan

89

89

90

89

-0.6

1.6

-0.8

United States

81

80

82

84

-0.2

2.0

2.6

Russia

71

74

75

75

3.7

0.9

0.1

South Korea

66

65

67

68

-0.6

3.1

1.4

Other Asia

66

68

76

85

2.4

11.9

12.0

1,885

1,916

1,947

1,974

1.6

1.6

1.4

China

a

World steel production

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 | December 2023

33

Resources and Energy Quarterly | December 2023

34

Resources and Energy Quarterly | December 2023

35





4.2

Spot iron ore prices strengthened in the December quarter driven bypositive sentiment associated with the ongoing policy stimulus provided
to the Chinese economy. Prices are likely to drift lower over the outlook
period.
Australian export volumes over H2 2023 have remained healthy,
reflecting an ongoing ramp up in new operations from established andemerging producers. Export volumes should rise steadily over theoutlook period.

Figure 4.1: Iron ore price, monthly
250
200
US$ a tonneSummary

Australia's iron ore export earnings are expected to rise from $124 billion
in 2022–23 to $131 billion in 2023–24, before falling to $102 billion in
2024–25 — driven by lower prices over the outlook period.

PricesIron ore prices further strengthened in the December quarter
Iron ore prices have lifted in recent months driven by improved market
sentiment following a series of Chinese government measures to support
China’s economy. After falling to around US$108 a tonne in August 2023
the benchmark iron ore spot price (basis 62% Fe fines CFR Qingdao) roseto average over US$120 a tonne in November 2023 (Figure 4.1). The spot
price for 62% Fe iron ore fines (FOB) for calendar 2023 is estimated toaverage around US$105 per tonne (Figure 4.5).
The rally in iron ore prices through the December quarter 2023 contrasts
with seasonal trends seen over the two previous years: in both 2021 and
2022, prices fell sharply late in the calendar year as Chinese steel mills cut
output to meet government production caps. Production cuts have notbeen strictly enforced in 2023 as the Chinese government prioritises
economic growth over other considerations (see Steel chapter).
China’s stronger than expected steel production has seen China’s total
iron ore imports continue to rise, increasing by 4.8% year-on-year in the
September quarter 2023, up 7.7% on June quarter 2023 imports(Figure 4.2).

Resources and Energy Quarterly | December 2023

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

Figure 4.2: China’s iron ore imports, monthly
120
100
Million tonnes

4.1

80
60
40
20
0

2020

Other

2021
Brazil2022
Australia

2023

12 month moving average (Total)

Source: Bloomberg (2023)

36

New infrastructure investment in China — resulting from substantial levelsof funding allocated over the past year — as well as new measures by the
Chinese government to alleviate weakness in the domestic property
sector, should provide support for construction activity, and hence Chinese
steel and iron ore demand into 2024 and 2025 (see Steel chapter).
Iron ore demand should also receive some support from restocking of ironore inventories in China in coming months. In mid-November, China’s
portside iron ore inventories fell to around 20% below historic averages,
the lowest level since 2016 (Figure 4.3). Reported iron ore inventories at
Chinese steel mills have also remained low compared with previous years.
This reflects negative margins in a majority of Chinese steel mills, due tolow steel prices in recent months. This likely contributed to a continuationof the decline in the 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).
Following last year’s production falls, ex-China steelmaking has made amodest recovery over H2 2023, with output in the September quarter up
around 2.2% year-on-year. The outlook period should see a modest rise iniron ore imports by major purchasers in Europe and North America, as wellas East and South-East Asia and the Middle East. This pickup should
provide support for iron ore demand and prices.
While risks to the global iron ore demand outlook remain, they have easedslightly in recent months. Inflation is moderating back towards target levelsin the major Western nations, potentially allowing central banks to remove
their restrictive monetary policy stance. The IMF’s November upgrades to
the Chinese GDP growth forecasts for 2023 and 2024 point to the potential
for stronger underlying demand for steel. However, this is contingent on
improved economic growth translating into improved confidence among
homebuyers, a key uncertainty at present.

Resources and Energy Quarterly | December 2023

Figure 4.3: China’s weekly iron ore port stocks
180
160
140
Million tonnes

However, China’s monthly steel demand has been gradually losing
momentum over the second half of 2023, resulting in rising steel
inventories across China. The weakness in steel demand builds on thelarge falls in Chinese steel consumption observed in 2022.

120
100
80
60
40
20
0
2016

2017

2018
2019
2020
Weekly port stocks

2021
2022
2023
5 year average

Source: Bloomberg (2023)

Prices to moderate over outlook period as supply rises and demand eases
China is projected to see modest falls in steel output over the outlook
period to 2025. This is expected to soften the rate of growth in global ironore demand in the coming years, driving iron ore prices down.
China’s stated aim to shift its economy away from investment-led (andtoward consumption led) growth is expected to be a key driver of thisdownward trend in prices. Lower demand for new residential andinfrastructure-related construction is expected, due to China’s declining
population (and workforce) and the tapering in China’s rate of urbanisationin recent years (see box 2.1 Resources and Energy Quarterly September2023). These structural trends are likely to add to the current over-supply
and financing problems in the real estate sector, further weakening steel
demand over the outlook period.
Rising steel demand and production capacity in regions such as emerging
Asia and the Middle East will see ex-China iron ore demand increase over
the outlook period. This includes over 100 million tonnes of integrated(Blast Furnace-Basic Oxygen Furnace) steelmaking capacity, expected tocome online in the next few years in Asia alone.

37

From an estimated average price of around US$105 a tonne (FOB) in
2023, the benchmark iron ore price is projected to steadily fall to an
average of about US$77 a tonne by 2025 (Figure 4.5).

4.3

Figure 4.4: Iron ore price spreads between grades180
135
Per cent difference*

Turning to global iron ore supply, the world’s two largest producers —Australia and Brazil — are expected to continue to collectively grow export
volumes by 2.3% per annum over the outlook period to 2025. This follows aramp up of greenfield projects for major Australian miners, and major
expansions planned by Brazilian producers including Vale and CSN. New
supply from emerging producers in Africa will also contribute to the growthin global trade of iron ore (see World trade section).

World trade

Total iron ore shipments from Brazil increased by 19 million tonnes in theyear to September 2023. A conveyor belt failure at Vale’s Northern System
operations and a temporary stoppage to maintain a tailings pipeline at its
Southern System operation, saw production fall in the September quarter.
However, iron ore exports rose 6.6% year-on-year as miners drew onstockpiles built up in the first half of 2023.

Resources and Energy Quarterly | December 2023

0

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)

Figure 4.5: Iron ore price outlook, quarterly
200

150

US$/tonne

Over the outlook period to 2025, global trade is expected to grow by 1.9%
annually, with new supply coming online in Australia, Brazil and Africa.
Australia is projected to see continued ramp up of greenfield projects fromestablished producers Rio Tinto, BHP and Fortescue, as well as emerging
producers such as Mineral Resources Limited and Atlas Iron. Over theoutlook period, Australia’s iron ore exports are projected to reach
947 million tonnes by 2025 (see Australia section for more detail).

45

-45
2017

Global iron ore exports rose in the September quarter 2023
Combined shipments for Australia, Brazil, South Africa and Canada —representing more than 80% of global seaborne supply — were estimatedat around 364 million tonnes in the September quarter 2023. This was a
5.0% rise quarter-on-quarter. In the year to September 2023, total
shipments for the four major exporting-countries were around 1,028 million
tonnes, a rise of 3.6% compared with the same period in 2022.

90

100

50

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)

38

Vale has stated it remains on track to meet its 2023 production guidanceof 310–320 million tonnes (compared with 310 for 2022).
Brazil is expected to grow iron ore exports by around 6.0% annually over
the outlook period to 2025. 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.
Outside of Australian and Brazil, iron ore exports are projected to
be bolstered by additional supply from Canada and India and new projects
coming out of Africa, including the 150 million tonne per annum plus
Simandou mine which is targeting first production in 2025–26.
CMRG begins annual talks with major iron ore producers
It has been reported that China’s state-owned company China Minerals
Resources Group (CMRG) has commenced talks with the world’s fourlargest iron ore mining companies — Rio Tinto, BHP, Vale and Fortescue.
Reports indicated that CMRG is seeking preferential terms on transport,
grades and delivery arrangements, as well as price. This follows a
November statement by the President of CMRG that iron ore prices had
reached ‘unreasonable’ levels and that the elevated input costs weresqueezing steel makers' margins.
Over the outlook period, CMRG is expected to play an increasing role incontract negotiations and price setting in the global iron ore market.
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 toguarantee the supply of important mineral resources — including theestablishment of a single, central purchasing platform for iron ore.
Primary tender awarded for Guinea’s Simandou mine
Progress on Guinea’s Simandou 150-200 million tonne mine continued in
the December quarter, with TAKRAF Group securing the primary tenderfor crushing and conveying systems at Rio Tinto’s Simandou operations.

Resources and Energy Quarterly | December 2023

In August, Rio Tinto announced it had reached agreement with the
Guinean Government and Winning Consortium Simandou to develop the
600 kilometre rail line required to transport the iron ore to the port. 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 theWinning Consortium Simandou, backed by Chinese and Singaporean
companies.
In October, Rio Tinto loaned US$100 million to the Chinese andSingaporean companies backing the Winning Consortium, with the loan tofund ongoing studies until a final feasibility study and funding agreement
for the rail and port can be struck with the Guinean government and therival mining consortium. The Guinean Government is targeting completionof infrastructure by 2024, and commercial production in either late 2025 orearly 2026.
India’s iron ore and pellet exports increased strongly in 2023
There remains considerable uncertainty about the likely trajectory ofIndia’s iron ore exports and imports over the next few years. Much will
depend on the rate iron ore production capacity, and associated rail andother infrastructure, can be brought online.
India's iron ore and pellet exports reached an estimated 31 million tonnes
in the year to September 2023, more than doubling year-on year.
However, as India’s steelmaking capacity continues to grow in the year
ahead, this is likely to reduce the quantity of iron ore available for export.
In November 2022, the Indian government cut the tax rate (from 50% to30%) for iron ore concentrates and scrapped the 50% export tax on low
grade iron ore it introduced in early 2022. The higher tax rates were seenat the time as an effort by the government to manage input prices andretain iron ore for India’s domestic industry. However, as India hashistorically been seen as a price-sensitive iron ore exporter — withdomestic 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.

39

4.4

Australia

Figure 4.6: Australian monthly iron ore export volumes
90

Australia’s iron ore export earnings were $33.1 billion in the September
quarter 2023, a 15% (or $4.3 billion) increase year-on-year. The increasereflected stronger iron ore prices and a weaker AUD/USD, with the unit
export price in the September quarter averaging around $146 per tonne —12% higher compared with the same period in 2022.

80

Australia exported 227 million tonnes of iron ore in the September quarter,up 2.3% year-on-year. The September quarter results lifted exports for the
first nine months of 2023 to 667 million tonnes (Figure 4.6). The result
reflected the ongoing ramp up of BHP’s South Flank, Fortescue’s Eliwana
and Rio Tinto’s Gudai-Darri operations.
Rio Tinto shipped 83.9 million tonnes of iron ore in the September quarter,
up 6% quarter-on-quarter and 1% year-on-year. The result reflected
productivity improvements across the Pilbara system and ramp up of the
Gudai-Darri mine. Rio Tinto’s 2023 guidance remains at the upper half ofthe 320–335 million tonne range. This includes a 5 million tonne benefit
from the implementation of the Safe Production System, which focuses on
improving safety, employee engagement and operational performance.
Rio Tinto announced it is seeking to increase production capacity of the
newly opened Gudai-Darri mine to 50 million tonnes a year, at a cost ofaround US$70 million. The planned capacity increase will be achieved
through upgrades within the plant, including chutes and conveyor belts, aswell as utilising an existing incremental crushing and screening facility
already on site.
BHP’s iron ore output was 63.2 million tonnes in the September quarter,up 2% year-on-year. Production guidance for 2023–24 is unchanged at
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) due for completion in 2024.

Resources and Energy Quarterly | December 2023

Million tonnes

Export volumes and values increased in September quarter

70

60

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)

Fortescue's total iron ore shipments were 45.9 million tonnes in the
September quarter 2023, a 6% decrease quarter-on-quarter. Fortescue’s
production guidance for the 2023–24 fiscal year remains at 192–197
million tonnes, which includes approximately 5 million tonnes of production
from Iron Bridge. Iron Bridge transitioned to operational production in
August 2023 when it achieved its first shipment of high grade magnetite
concentrate.
Mineral Resources’ iron ore production was 4.8 million tonnes in the
September quarter 2023, an 8% increase quarter-on-quarter. Exports in
the September quarter were 3.9 million tonnes and were impacted bytemporary haulage and port constraints. Progress continues on the
30 million tonnes per annum Onslow Iron project. Drill and blast operations
have commenced at the mine site, in addition to the commencement ofearthworks on the private haul road. Port construction is also wellprogressed, with the first ore-on-ship delivery expected in June 2024.

40

Figure 4.8: Australian iron ore exploration expenditure

Australia’s iron ore export earnings are estimated to reach $131 billion in
2023–24, up from $124 billion in 2022–23. The increase reflects higher
production volumes, a weaker exchange rate and a slightly higher average
price. Moderating prices and a higher AUD/USD over the outlook period
are forecast to lead to lower iron ore earnings, with exports of $102 billion
in 2024–25 (Figure 4.7).

1,000

160

750

120

500

80

250

40

0
2012–13

2015–16
Volume2018–192021–22

350
300
250
200
150
100
50

A$ billion

Million tonnes

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

400$ millions

Export values to ease over outlook on moderating prices

02024–25

Values (rhs)

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

02001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023
Source: ABS (2023) Catalogue 8412.0

Revisions
Export earnings in 2023–24 have been revised up from the September
2023 Resources and Energy Quarterly reflecting higher forecast prices
and a lower-than-expected exchange rate; we now expect earnings of$131 billion rather than $120 billion. Earnings in 2024–25 are $2 billion
higher than forecast in the September 2023 Resources and Energy
Quarterly.

Exploration rose in September quarter 2023
A total of $196 million was spent on iron ore exploration in the September
quarter 2023 (Figure 4.8). This was 2.4% higher compared with theprevious quarter, and 1.8% lower than the same period in 2022.
Exploration has fallen from near decade highs last year. However, thelatest results continue the broad upward trend in iron ore exploration which
was triggered by the historical high iron ore prices of above US$200 atonne reached in the first half of 2021.

Resources and Energy Quarterly | December 2023

41

Table 4.1: World trade in iron ore
Million tonnes

Annual percentage change

2022

2023 s2024 f

2025 f

2023 f

2024 f

2025 f

1,574

1,609

1,635

1,665

2.2

1.6

1.8

China

1,108

1,152

1,122

1,094

4.0

-2.6

-2.6

Japan

104

106

108

107

1.7

1.6

-0.8

European Union

114

99

113

114

-13.3

13.5

1.4

South Korea

66

71

73

74

7.4

3.0

1.3

Rest of Asia

58

62

74

95

6.2

19.5

27.7

India

2

4

12

20

94.2

202.6

69.5

Australia

884

902

917

947

2.1

1.7

3.3

Brazil

346

367

390

413

6.1

6.3

5.9

South Africa

58

59

60

61

1.7

1.7

1.7

Canada

54

56

58

60

3.7

3.6

3.5

India

16

35

32

27

118.5

-8.5

-15.6

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 | December 2023

42

Table 4.2: Iron ore outlook
Million tonnes
World

Annual percentage change

Unit

2022

2023 s2024 f

2025 f2023r

2024 f

2025 f– nominal

US$/t

103

105

87

77

1.9

-16.8

-12.0

– real b

US$/t

107

105

85

73

-2.3

-19.1

-14.1

Australia

Unit

2021–222022–23

2023–24 f

2024–25 f

2022–23

2023–24 f

2024–25 f– Steel c

Mt

5.8

5.6

5.7

5.8

-2.6

1.4

1.2

– Iron ore g

Mt

929

957

971

1,012

3.0

1.5

4.3

Mt

0.81

1.21

1.04

1.13

50.1

-14.2

8.2

– nominal value

A$m

1,047

1,355

1,165

1,181

29.5

-14.0

1.4

– real value i

A$m

1,170

1,415

1,165

1,142

21.0

-17.7

-2.0

Mt

874

895

910

931

2.4

1.7

2.2

– nominal value

A$m132,489

124,101

130,958

101,599

-6.3

5.5

-22.4

– real value

A$m

148,058

129,580

130,958

98,209

-12.5

1.1

-25.0

Prices a

Production

Exports
Steel cIron orehiNotes: 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 | December 2023

43

Resources and Energy Quarterly | December 2023

44

Resources and Energy Quarterly | December 2023

45

•

Summary
Metallurgical coal prices remain well above pre-2019 levels and have
spiked further in recent months on the back of supply concerns.

•

The Australian premium hard coking coal price is expected to average
US$293 a tonne in 2023, easing to around US$203 a tonne by 2025.

Australia’s exports are forecast to lift from 156 Mt in 2022–23 to 174 Mt
in 2024–25, as several new mines open (see Australia section).



As prices decline, the value of Australia’s metallurgical coal exports is
forecast to fall from $61 billion in 2022–23 to $41 billion in 2024–25.

5.2

World trade

Demand for metallurgical coal has remained strong, increasing by 18% in
the first 8 months of 2023 compared to the equivalent months in 2022. The
largest increase came from China, whose January to August 2023 importsrose by 61% compared with the same period of 2022. This increase is off
a relatively low base since China’s 2022 steel production was affected by
COVID-19 lockdowns and a slowdown in the residential property sector.
Prices for metallurgical coal have been relatively stable compared to the
spikes immediately following Russia’s invasion of Ukraine. The price ofAustralian prime hard coking coal is estimated to average US$293 a tonnein 2023, although prices have started rising in the last couple of months,
averaging US$338 a tonne over October and November. This recent
growth is attributable to increased demand from China and India and tightsupply from Australia.
World metallurgical coal trade is forecast to increase from 312 Mt in 2022
to 318 Mt by 2025, led by rising demand in India. The supply gap
experienced in the first half of the year has started closing with improved
weather conditions. Chinese imports are expected to fall back from record
levels in 2024 before increasing slightly in 2025.
India is expected to overtake China as the primary growth market for steel
production and will become the biggest driver for long term growth indemand for metallurgical coal. India’s steelmaking pipeline includes

Resources and Energy Quarterly | December 2023

projects that will come online over the outlook period, leading to a jump in
metallurgical coal imports (Figure 5.1).
Steelmaking in Europe remained soft in December quarter with overall
steel output in the European Union falling by 9% in the first nine months of2023 compared with the equivalent period in 2022. High interest rates
contributed to the softening in construction with residential, commercial,and infrastructure construction all seeing declines.

5.3

World imports

A significant theme in the outlook period will be the ongoing switch to India
from China as the largest importer of metallurgical coal, particularly as
India’s steel making capacity continues to rise.
Figure 5.1: Metallurgical coal imports
90
80
70
Million tonnes

5.1

60
50
40
30
20
10
0

China
2019

Japan
2020

2021

South
Korea

Taiwan

2022

2023f

India
2024f

EU27
2025f

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

46

Chinese metallurgical coal imports likely to ease
Demand for metallurgical coal from China is influenced by the expected
outlook for steel, and Chinese government policy. China’s steel output fellin the September quarter 2023. Although China’s property sector
continues to slow, demand for Chinese manufacturing and infrastructure
investment has assisted in maintaining metallurgical coal imports.
China’s policy settings heavily influence the Chinese steel industry which
has faced government mandated production cuts for the third year in a row
to reduce carbon emissions. China is also looking to increase its use of
scrap steel in its production of recycled nonferrous metals which could
further reduce demand for metallurgical coal.
Despite the downturn in China’s steel output, imports of seaborne
metallurgical coal rose in 2023 (Figure 5.2). One of the factors contributing
to this increase is safety concerns around China’s coal mines. In early
2023, reports began to emerge of a number of accidents in coal mines.
Local authorities carried out safety inspections resulting in the stoppage of
operations and an overall strengthening of mining and safety regulations.
These stoppages have led to greater demand for seaborne imports.
Figure 5.2: Chinese metallurgical coal imports, monthly
12

Million tonnes

10
8

India’s metallurgical coal imports are growing on structural factors
Indian metallurgical coal imports were strong in 2023, with a 13% rise in
the first 8 months of 2023 compared with the equivalent period in 2022.
This comes despite a general softening in the global steel outlook andreflects years of investment intended to build up India’s steel production.
Australia continues to be the primary supplier of metallurgical coal to India
however has lost market share over the last couple of years. In 2019,
Australia supplied India with two thirds of its metallurgical coal. In the first
8 months of 2023, this dropped to 49%. Discounted coal from Russia has
been the primary driver of this change, with Russian metallurgical coalmaking up 19% of total Indian metallurgical coal imports, compared to 6%
in 2019. As the discount for Russian coal diminishes further, Australia will
likely regain some of this share.
India’s demand for steel is expected to continue to grow, driven by the
manufacturing and construction sectors. India’s steel output rose 12% in
the first nine months of the year compared to the equivalent period in
2022. India is rapidly expanding its domestic steel production capacity andaims to double crude steel production capacity by 2030.

6
4
2
0
2017
2018
2019
2020
Australia Canada Mongolia

The removal of Chinese restrictions on imports of Australian coal saw
Australian thermal coal resume their pre-2020 levels. Comparatively,
imports of Australian metallurgical coal have not recovered in the sameway. In 2019–20, China imported large amounts of its metallurgical coalfrom Australia (41% share) and Mongolia (45% share), with Russia only
making up 7%. The primary source markets to fill the loss of Australian
imports were Russia and Mongolia, with the share of Russian imports
jumping even higher following the Ukraine invasion. From January toAugust 2023, Russia supplied 28% of China’s metallurgical coal, Mongolia
supplied 52%, and Australia supplied just 2%. Imports of Mongolian coalrose as rail links to China were substantially upgraded.

2021
RussiaSource: McCloskey (2023)

Resources and Energy Quarterly | December 2023

2022
2023
United States Others

Some of the projects in India’s steelmaking pipeline are expected to comeonline over the outlook period, leading to a corresponding jump in
metallurgical coal imports to 73 million tonnes in 2024 and 2025. This is
26% higher compared to the 2022 total of 58 million tonnes.
47World exports

Structural shortfalls in metallurgical coal markets have mostly eased, but asmall shortfall is likely to persist for at least another year. Inventories are
low in some countries and some Russian supply remains stranded fromworld markets. Any further downturn in global steelmaking (or tightening
policy from China) could result in a surplus of metallurgical coal supply,
potentially lowering prices.
US coal exports remain strong but potential disruptions signalled
US suppliers are benefitting from infrastructure and transport upgrades,and from the removal of some competing Russian supply due to sanctions
by many western nations.
Coal exports remain strong and have been supported recently by the
resolution of several infrastructure faults. However, lack of access tocapital has hampered investment opportunities. US mines are also facing
labour force shortages which pose risks to US supply over the outlook
period. Despite these disruptions Rameco has hit its long-term goals earlyin 2023, reaching 3.6 Mt by September.

Figure 5.3: Metallurgical coal exports
200
160
Million tonnes

5.4

120
80
40
0
Australia
US
Canada
2019
2020
2021
2022

Mongolia Russia Mozamb.
2023s
2024f
2025f

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

Canadian mines expected to maintain output
US metallurgical coal exports are generally high-cost but remain profitable
for the time being. Over the outlook period, US exports are expected toexperience minimal growth as prices fall and marginal or cost-sensitive
exporters withdraw from the seaborne market.
Safety concerns may hamper Mongolian coal exports in the short term
Mongolian exports are expected to steadily rise to 19 Mt by 2025,
recovering from a drop off due to COVID-19 restrictions and reduced
worldwide demand. Despite the easing of disruptions, supply is unlikely toreach the pre COVID-19 highs of 27 Mtpa in either year of the outlook
period (Figure 5.3).
Short term supply from Mongolian mines could be affected by safety
inspections following an accident involving multiple fatalities in October.
Whilst the accident occurred in a thermal coal mine, the sweeping safety
checks could disrupt supplying metallurgical coal mines.

Resources and Energy Quarterly | December 2023

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.
Canada has also experienced some mine safety issues which will impact
supply. A stop work order was issued after a roof fall at the Donkin Mine in
Nova Scotia. The mine has since been given approval to move towards
restart, but the operator has indicated there may be further delays.
Exports out of Mozambique are growing, supported by improved transport
In the early stages of the COVID-19 pandemic, Mozambique’s exports fell
temporarily as low prices forced much of the nation’s high-cost production
out of the market.
Neighbouring nations use Mozambique’s ports to export their metallurgicalcoal. Exports from the Majhado project in South Africa are expected to48

commence from mid-2025. The mine has potential to produce up to 4 Mtof metallurgical coal per annum.

steelmaking capacity may also add upward pressure to metallurgical coalprices over the long term.

Russian mines reapproaching capacity but tariffs may hurt production

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

Despite the ongoing sanctions, raw coking coal output partially recoveredin September, with the Kuzbass mine set to return to normal operations.
Output at the mine rose by 2% in September but remains 3% lower
through the year.
The Russian Government is imposing export duties on exports outside of
the Eurasian Economic Union from 1 October 2023 until the end of 2024.
This could result in a duty of up to 7% on metallurgical coal. The duty isdependent on the Ruble-US dollar exchange rate. This duty will squeeze
the already tight margins of coal miners from US$5-15 a tonne to US$0-8
a tonne, resulting in the potential curtailing of output if prices don’t rise.

5.4

Prices

Metallurgical coal prices set to decline further
Metallurgical coal prices experienced further increases in the December
quarter as supply tightened in Australia. Australian premium hard coking
coal prices averaged US$320 a tonne in November 2023 — the highest
level observed in any month this year (Figure 5.4).
Australian coal supply was disrupted in September when operations at
BMA’s Peak Downs mine in central Queensland were suspended after two
truck sliding incidents. Although the suspension applied to only parts of themine’s operations, they were enough to place upward pressure on prices.
The weak monsoon season and government spending in India supported
steel production in August, with additional construction activity leading to a
drawdown of coal supplies. The long-term expansion of India’s

Resources and Energy Quarterly | December 2023

700
600
500
US$ a tonne

Russia’s invasion of Ukraine has resulted in a dramatic decline in thermal
coal exports – and initially a more modest easing in metallurgical coal
output from the region. The war has recently escalated around the BlackSea where significant quantities of seaborne coal are traditionally loaded
and shipped.

400
300
200
100
0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Australian prime hard coking

US Low Vol

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

Supply constraints experienced during the La Niña cycle have eased, withdemand for metallurgical coal likely to follow the softening outlook for
growth in global steelmaking. Chinese steelmaking still carries downside
risks as overall policy settings are unfavourable to the carbon intensive
sector. The removal of China’s informal import restrictions on Australiancoal have allowed trade to resume but shifts in trade patterns away from
Australian imports (that occurred after 2020) appear likely to persist.
Over the outlook period, more stable supply and weaker demand should
result in a moderate decline in prices, though weather events and conflictaround the Black Sea region add to upside risks. The price of Australian
metallurgical coal is forecast to decrease from US$293 a tonne in 2023 toaround US$203 a tonne by 2025.

49

Australia

Metallurgical coal export volumes are growing, offsetting lower prices
Australia remains the world’s largest metallurgical coal producer,
accounting for 53% of the worlds exported volume. Australian metallurgicalcoal output steadied in 2023 and then began to rise as persistentdisruptions from La Niña finally eased (Figure 5.5). The current El Niño
episode is likely to bring about sustained dry conditions over the rest of2023–24, though summer storms remain a risk factor for ports/shipping.
Labour force shortages continue to impact metallurgical coal production
across mine sites. According to ABS labour force data, total employment
in the coal mining sector has dropped 14% from pre-pandemic levels. The
average number of persons employed in coal mining in 2019 was 53,000,
compared to 46,400 in 2021 and 45,900 in 2023. Some of this may reflect
capital deepening and other structural changes, but labour shortages arealso believed to be acting as a constraint.
Demand for Australian metallurgical coal could be propped up by growing
thermal coal prices. Metallurgical coal can be substituted for thermal coalfor the purpose of power generation; however, the reverse is not possible.
Therefore, sales of metallurgical coal into thermal markets remains apossibility, especially when the price per calorific value of metallurgicalcoal falls below that of thermal coal. There is a risk that an unusually harsh
winter or summer could result in metallurgical coal becoming morecompetitive than thermal coal, and the pivot of 2022 (when substantial
quantities of metallurgical coal were dumped into thermal markets) could
recur.
Growth in production is still expected over the outlook period. Mine
expansions and openings are expected to exceed closures (depending on
approvals), with metallurgical coal exports expected to experiencestronger growth than thermal coal. Over the outlook period, this will
position Australia to meet the demand of emerging steel markets in theregion.

Resources and Energy Quarterly | December 2023

Mines that could expand commercial operations in the next couple ofyears include the Hillalong, Wilton and Fairhill projects in Queensland(depending on approvals). Sojitz Blue has also received approval for its
Gregory Crinum open cut coal extension, which could now potentially run
for another 20 years. The extension of the Mandalong and Vickery mines
in NSW will also boost output.
Figure 5.5: Australia’s metallurgical coal export volumes, monthly
20

15
Million tonnes

5.5

10

5

0
Jan-19Japan

Jan-20China

Jan-21

South Korea

TaiwanJan-22India

Jan-23

VietnamRest of world

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

Higher production in New South Wales and (especially) Queensland is
expected to lift Australia’s exports from a weather-affected 156 Mt in
2022–23 to 174 Mt by 2024–25. Metallurgical coal export earnings are
expected to ease from $61 billion in 2022–23 to $41 billion by 2024–25(Figure 5.6), with higher volumes partly offsetting falling prices.
Revisions to the outlook for Australian metallurgical coal exports
The earnings forecast for 2023–24 has been revised up by around$5 billion from the September 2023 REQ, based on an upward revision to
prices. The forecast for 2024–25 is largely unchanged.

50

84

180

72

150

60

Million tonnes

210

120

48

90

36

60

24

30

12

0

2018–192020–21
Volumes2022–23

2024–25

A$ billion

Figure 5.6: Australia’s metallurgical coal exports

0

Values (rhs)

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

Resources and Energy Quarterly | December 2023

51

Table 5.1: World trade in metallurgical coal
Annual percentage change
Unit

2022

2023s

2024f

2025f

2023s

2024f

2025f

Mt

312

313

311

318

0.2

-0.6

2.1

China

Mt

64

78

54

55

22.6

-31.4

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

159

173

176

-1.1

8.9

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 | December 2023

52

Table 5.2: Metallurgical coal outlook
Annual percentage change
World

Unit

2022

2023s

2024f

2025f

2023s

2024f

2025f

– nominal

US$/t

372

289

229

204

-22.2

-21.0

-10.7

– reald

US$/t

389

289

224

195

-25.7

-22.7

-12.6

– nominal

US$/t

364

293

219

203

-19.6

-25.1

-7.4

– reald

US$/t

382

293

214

194

-23.4

-26.8

-9.3

Australia

Unit

2021–222022–23

2023–24f

2024–25f

2022–23

2023–24f

2024–25f

Production

Mt

168

167

173

178

-0.5

3.6

2.8

Export volume

Mt

163

156

169

174

-4.3

8.3

3.0

– nominal value

A$m67,58861,252

52,11340,575

-9.4

-14.9

-22.1

– real valuei

A$m71,972

61,301

49,96937,697

-14.8

-18.5

-24.6

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 | December 2023

53

Resources and Energy Quarterly | December 2023

54

Resources and Energy Quarterly | December 2023

55

Summary

As prices fall, Australian thermal coal exports are forecast to fall from apeak above $65 billion in 2022–23 to about $29 billion by 2024–25.



Prices for Newcastle 6,000kcal thermal coal dropped to US$122 a tonnein November 2023, compared with US$159 a tonne in September 2023.
The price weakness largely reflects high stockpiles in China and fewer
supply disruptions. Prices are expected to drift lower as supply rises anddemand moderates over the outlook period.



6.2

A return to more favourable production conditions is expected to see
Australian thermal coal exports rise from 182 million tonnes (Mt) in
2022–23 to 203 Mt by 2024–25 (see Australia section).

Figure 6.1: Chinese coal inventory
600
500
Million tonnes

6.1

Thermal coal trade in Asia in 2023 is set to outpace 2022 by 17%, with thebiggest driver of this rise being China’s stockpiling of coal (Figure 6.1).
Vietnam more than doubled imports in the first 8 months of 2023, and is
expected to continue to lift imports in the outlook period. The most notable
fall in imports in 2023 was in Japan where two nuclear reactors restarted.
Energy security concerns — which were already high from the RussiaUkraine war — have been exacerbated by the Hamas-Israel conflict. While
the Gulf region does not export material volumes of thermal coal, it does
export LNG, which is one of the primary substitutes used in power
generation. Further escalation of the Hamas-Israel conflict could result inincreased gas and oil prices, leading to additional thermal coal demand.

Resources and Energy Quarterly | December 2023

300
200
100

World trade

Global demand for coal held up in 2023 (year to date), increasing by 2%
compared with the same period in 2022. The most notable lift in demandcame from China, where coal imports almost doubled in 2023, in response
to increased demand for cooling, and significant stockpiling of coal.
Imports to the European Union and United Kingdom fell to 52 Mt over theyear to August. This compares with 69 Mt over same period a year ago asEuropean nations scrambled to obtain substitutes for Russian coal.
Europe accumulated ample stocks of coal and gas in 2022, reducing its
2023 import needs considerably.

4000Jan-19Jan-20Jan-21

Jan-22

Jan-23

Source: Bloomberg (2023)

6.3

World imports

Global imports of thermal coal are expected to increase by about 0.4% in
2023 as a result of high demand for seaborne coal from China, Vietnam,
and Turkey (Figure 6.2). In 2024 and 2025, world imports are expected todrop by 2.1% in 2024 to allow high inventory levels to normalise, before
resuming in 2025 with a 1.5% increase.
China’s inventory levels steadily increased to record levels
Energy security concerns borne of geopolitical tensions have prompted
China to stockpile coal inventories to record levels in 2023. China’s coalinventories have more than tripled over the last couple of years. Import
volumes have been up every month in 2023, resulting in a total increase of
77% of coal imports in the first nine months of 2023 compared with 2022
(Figure 6.3).
Indonesia, Australia and Russia are the primary exporters meeting thisadditional demand.

56

Figure 6.2: Thermal coal imports

China’s coal-fired power output rose in 2023 despite its announced targetof reducing output. China also loosened the rules governing its carbon
market to make it easier for power generators, helping to mitigate the riskof electricity shortages. China’s Emissions Trading Scheme allocatescarbon permits based on a power plant’s output, with different benchmarks
for each fuel and technology. Reports suggest coal-fired power plants thatneed to buy permits to meet emissions targets by the end of the year havebeen allowed to borrow from future allowances.

320

Million tonnes

280
240
200
160
120

China aims to lower its carbon intensity by over 65% by 2030 compared to2005 levels, and to reach 1,200 GW of installed wind and solar power.

80
40
0

China
2019

Japan
2020

South
Korea
2021

Taiwan

2022

India

2023s

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 6.3: China’s thermal coal imports, monthly

Million tonnes

40

Hong Kong continues to transition its energy use ahead of mainland
China, with imports declining a further 9% in 2023 compared to the same
period in 2022. Imports to Hong Kong fell sharply in 2020 following the
pandemic, reducing from 10 Mt in 2019 to just 5.5 Mt in 2020. Hong Kong
also bucked the trend of returning to historical import levels in 2021 (6.5Mt) during the post pandemic surge in economic activity, and in 2022 (6.2Mt) following Russia’s invasion of Ukraine. These reduced imports of coal
had been planned for some time with Hong Kong having ceased building
coal-fired generation units and phasing out existing units. Hong Kongplans to phase out coal for use in power generation by 2035.

35

India’s coal imports will increase as industrial and consumer use rises

30

More favourable weather conditions and the resulting increase in domestic
production led to a slight drop in India’s seaborne thermal coal imports –dropping to 150 Mt in 2023 compared to 153 Mt in 2022. India is expected
to increase thermal coal imports over the outlook period, remaining themost significant growth market. This growth will be supported by risingindustrial use and higher electricity requirements in the consumer sector.

25
20
15
10
5
0
2017

2018
Australia

2019
2020
2021
2022
Indonesia
Mongolia
RussiaSource: McCloskey (2023)

Resources and Energy Quarterly | December 2023

2023
OthersIndia’s demand for thermal coal has remained high over the last few
months due to the monsoon season. Insufficient rainfall contributed toincreased temperature and humidity levels and drought conditions in partsof the country, leading to increased cooling and irrigation requirements.
These same conditions also helped India’s domestic coal mining, withproduction from Coal India – India’s largest domestic coal producer –57

increasing by 13% in August 2023 compared with August 2022. India’s
demand for thermal coal is expected to remain elevated as the December
quarter brings India’s festivities season, and higher winter demand.
India’s Power Ministry asked utility companies to import at least 6% of theircoal needs until September 2023. This mandate has now been extended
to March next year at 4% to meet demand.

Figure 6.4: India’s thermal coal imports, monthly
20
18
16
Million tonnes

Figure 6.5: Japan, South Korea and Taiwan's thermal coal imports
14
12
Milloin tonnes

With domestic coal production expected to steadily increase, India isplanning to lift the efficiency of coal transportation to consumption centres.
India has set a target to nearly treble the volume of coal transport via
coastal route or Rail-Sea-Rail method. Measures being considered could
lift seaborne transport from 40 Mt per year, to 112 Mt by 2030.

equivalent period in 2022 (Figure 6.5). The most significant fall was inimports from Russia, which the Japanese Government has been seeking
to cut following Russia’s invasion of Ukraine. In 2021, before the Russia
invaded Ukraine, Russian imports accounted for 12% of thermal coal
imports to Japan. In 2023, that has dropped to just 3%. The US and South
Africa have helped to fill this gap.

14

10
8
6
4
2

12

0
Jun-20

10
8
6

Japan

Jun-21

South Korea

Jun-22
TaiwanJun-23

Source: McCloskey (2023)

4

Taiwan’s imports are falling as policy measures ramp up

2
0
2018

2019

Indonesia

South Africa

2020

2021

United States

2022
Australia

2023
RussiaOther

Source: McCloskey (2023)

Japan’s coal imports are expected to remain strong in the short-term
Mild weather during much of 2023 has reduced Japanese electricity use,
and the restart of two nuclear reactors in August and September also
reduced the need for thermal coal imports. Japan’s imports of thermal coal
dropped by 11% over the first 9 months of 2023 compared to the

Resources and Energy Quarterly | December 2023

Taiwan’s thermal coal imports fell by 18% in the first 9 months of 2023
compared to the equivalent period in 2022 due to muted domestic power
demand, and Taiwan’s continued plans to transition away from thermalcoal. Imports have steadily declined over the last few years, except for
2021 during the post pandemic surge in economic activity.
Demand picked up over the summer due to the lack of rainfall and dryweather, which led to a decline in hydropower output. This resulted in amoderate uptick in thermal coal imports in June, July, and August, which
offset some of the decline in other months. A typhoon hit Taiwan in
October, with heavy rain and winds which affecting port operations.
58

South Korean power generation companies to reduce Russian coalSouth Korea’s imports of thermal coal dropped by a moderate 6% over the
first 9 months of 2023 compared to the equivalent period in 2022. Demand
peaked over the summer months and remained high (at 9.6 Mt) in August,before dropping off in September (7.9 Mt).
The South Korean government has asked state owned power generationcompanies to reduce coal imports from Russia, in protest to its invasion of
Ukraine. This appears to have contributed to a 16% drop in thermal coal
imports from Russia in September compared with August, though the endof the Northern Hemisphere summer could also have contributed.
South and South-East Asian coal imports
South and South-East Asia is one of the few regions that is expected tosee a rise in demand over the forecast period (Figure 6.7). This region
imported 150 Mt in 2023, an increase of 5% from 2022. Imports are
expected to rise to 165 Mt by 2025 due to the number of coal-fired power
plants under construction.

The biggest contributor to this growth is Vietnam. Vietnam’s energy plancalls for an increase of 40% in coal-fired power generation capacity by
2030. Vietnam still aims to eliminate coal from its energy mix by 2050,
however a material drop in coal fired capacity is not expected before 2045.
A number of other nations in the region are expected to experience minor
growth in thermal coal imports over the outlook period, including Malaysia,
the Philippines, Thailand and Pakistan. But, with coal-fired power plant
constructions becoming increasingly stalled, it is likely that a larger shareof growth in electricity generation will be driven by gas and renewables.

6.4

World seaborne exports are estimated to increase this year by 0.4%, goingfrom 1,043 Mt in 2022 to 1,047 Mt in 2023. Exports are then expected to
decline to 1,026 Mt by 2024 before climbing back up to 1,041 by 2025.
Figure 6.7: Thermal coal exports
500
450

Figure 6.6: South and South-East Asia thermal coal imports

400
Million tonnes

200

Million tonnes

World exports

150
100

350
300
250
200
150
100

50

50
0

0

2013

2015

2017

2019

2021

VietnamPhilippines

Malaysia

Bangladesh

Pakistan

Other

2023

2025

ThailandIndonesia Australia
2019

2020

2021

Russia2022

Colombia
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)

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

Resources and Energy Quarterly | December 2023

59

In September 2023, the Australian Bureau of Meteorology declared that an
El Nino weather episode was underway. Moreover, the Indian Ocean
Dipole is strongly positive. Both suggest drier than normal weather inAustralia and Indonesia over the near term. These dryer weather
conditions could be more favourable for Australian coal exports than overthe past three years. However, an El Niño raises the likelihood that riverlevels will drop in Indonesia, making barging more difficult.

the first eight months of 2023. After the discount began to ebb, a 30% drop
in imports of Russian coal was observable from mid-2023. This is likely
due to a combination of factors including seasonality, increased risk from
Russian ports being declared a war zone (and large subsequent increases
to insurance costs), and reduced discounts for Russian coal compared toother competitors in the region.

Indonesia’s exports are facing a new cycle of weather disruptions

US exports of thermal coal have been particularly strong recently, with
exports in almost every month surpassing their equivalent in 2022. Indian
demand for US thermal coal was especially high. US thermal coal exports
also helped filled the supply gap faced by Europe following sanctions on
Russian coal. Sanctions went into full effect in August 2022, and US
exports to the EU the UK more than doubled between 2021 and 2022.

Indonesian exports remained strong in 2023, with the nation easily
maintaining its position as the world’s top exporter of thermal coal. In
2022, Indonesia went from shipping just over a third of the world’s thermalcoal, to shipping almost half, replacing most of the supply gap left by
Russia. But the El Niño-driven drought in Indonesia is now lowering riverlevels, and this threatens to make thermal coal more difficult to barge todeepwater ports — potentially impacting a large volume of exports.
Indonesian exports to China face growing competition from Australia andRussia, with both providing a higher share of China’s imports as it seekscoal with a higher calorific value to blend with lower calorific coal.
Indonesia introduced a new tariff collection system in October for ship-toship services at the Muara Berau port in east Kalimantan. Mine companies
and floating crane operators are holding protests, with some loading
operations ceasing. Muara Berau is one of the largest anchorages inIndonesia. If the issue escalates, it could add to supply pressures.
Russia coal exports are continuing to face challenges
Russian coal was sold at a heavy discount following the invasion of
Ukraine, with discounts of up to 73% on spot markets, and 58% to buyers
who did not impose sanctions such as Türkiye and India. However, these
discounts reduced around mid-2023 as Russian thermal coal prices beganconverging with other price indexes in the region.
The most notable shift post invasion occurred in India, where buyers are
typically highly sensitive to price changes. Imports of Russian thermal coal
jumped from about 1,500 tonnes in 2021, to almost 19,000 tonnes in justResources and Energy Quarterly | December 2023

US exports remain hampered by weather conditions and high costs

Columbian thermal coal exports unlikely to recover to pre pandemic levels
Exports from Columbia are on track to exceed 2022 levels this year, withweather conditions easing following the end of La Niña. Although
Colombian thermal coal exports had faced a gradual decline over theyears, they fell sharply during the COVID pandemic, falling to 52 Mt in2020 from 76 Mt in 2019. With some mines now permanently closed andothers disrupted, it is not expected that Colombia will reach its pre-COVID
export levels.
The Cerrejon mine continues to experience sporadic disruptions tooperations from local indigenous communities protests and potential union
strikes. Cerrejon will be able to continue with expansion into the La Puente
pit following a court decision.
South African exports are facing cost pressures
South African exports have been relatively stable in 2023, despite an early
dip linked to heavy rain and flooding caused by the La Niña weather
episode. But lower prices have begun to affect higher-cost coal producers
in South Africa, resulting in less usage of the more expensive forms oftransportation. Coal truck volumes to South African ports were down by
over 30% in July relative to January 2023. Rail transport is largely

60

unaffected, but use of rail is generally dominated by the nation’slarger/wealthier coal mining companies.
The monsoon season in India — which usually runs from June to
September — led to a temporary decline in the Indian market with exports
sharply dropping in June and slowly recovering in the following months.
High demand in South Korea over summer helped mitigate the loss.

6.5

PricesPrices have stabilised following a sustained decline
The price of Newcastle 6,000kc NAR thermal coal has recently settled in a
relatively narrow band (between US$120 and US$160 a tonne) after falling
sharply in the March quarter 2023. The price differential between high andlow-grade thermal coal contracted in 2023 (Figure 6.8).
Figure 6.8: Thermal coal prices — Australian vs Indonesian
450
400
350

Most factors point to a decline in prices over the outlook period. Supply
has not yet fully recovered from La Niña disruptions, and there is capacity
to bring additional supply into markets over coming months. The end of theNorthern Hemisphere winter will place downward pressure on thermal coaldemand in early 2024. Global gas supplies are expected to increase in
2025 and 2026 with the US and Qatar bringing extra supply online. Lower
gas/LNG prices should reduce pressure on thermal coal markets.
Prices are not expected to decline to 2019 levels. A range of structural
price pressures have manifested in thermal coal markets over the last few
years. Supply is likely to remain constrained by low capital availability,
labour shortages, loss of Russian output following the invasion of Ukraine,and rising global freight costs.
Australian metallurgical coals have retained their premium to thermal coal,
after dipping below the price for benchmark Newcastle 6,000kc NAR in H2
2022 and Q1 2023 (Figure 6.9). This premium encouraged somemetallurgical coal producers to dump (low grade) product into thermal coalmarkets, eventually depleting metallurgical coal inventories to low levels.
Figure 6.9: Prices for thermal and low-grade coking coals

300

800

250
200

600

100
50
0
2013

2015
2017
Indonesia 4,700 NAR
Newcastle 6,000kc NAR

2019

2021
2023
Newcastle 5,500kc NAR

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

Firmer prices are possible as the year turns, with the recent lift in gas/LNG
prices improving the competitiveness of thermal coal, especially in Asia. A
colder than normal Northern Hemisphere winter could also add to thermal
coal demand, though stocks are high (especially in China and Europe).
Resources and Energy Quarterly | December 2023

US$ a tonne

150

400
200
0
Feb-21
Aug-21
Feb-22Aug-22
Feb-23Aug-23
Newcastle basis 6,000kc NAR
Newcastle 5,500kc NAR
Australian semi-soft cc
Australian LV PCI
MCC2 Australian mid-vol PHCC

Source: McCloskey (2023)

61

Profit margins may become narrower in some countries over the outlook
period, as prices decline and cost of production pushes up. If costs
continue to rise significantly over coming years, this could place anotherfloor under coal prices.
The 6,000 kcal Newcastle coal price is expected to decline from just under
US$173 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 given the likely ongoingstranding of some Russian coal production.

6.6

Australia

Australian thermal coal export volumes have recovered
Demand for Australian thermal coal exports remained high in 2023, andsupply to the export market improved following two years of wet weather
and labour force disruptions. The former was associated with the La Niña
weather episode, while the COVID pandemic and mine labour shortages
drove workforce problems. Exports were especially high over June andJuly 2023 to meet summer demand in Asia.
Australian thermal coal exports to China rose steadily over H1 2023,
reaching a peak in June 2023 during China’s peak summer demand. In
value terms, thermal coal exports to China total $5.3 billion in the first 9
months of the year. Japan — usually the largest market for Australian
thermal coal — was pushed to second place in the June quarter.

Resources and Energy Quarterly | December 2023

On balance, it is expected that export volumes will experience minor
growth over the outlook period (Figure 6.9) with better weather conditions
and increased production from several 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 decline in export values from $65 billion in
2022–23 to $29 billion by 2024–25.
Figure 6.10: Australia’s thermal coal exports
250

75

200

60

150

45

100

30

50

15

0

2018–192020–21
Volumes2022–23
Export values

2024–25

A$ billion

Price risks remain somewhat balanced. Thermal coal demand faces
downside risks, with a weak Chinese recovery, a mild Northern
Hemisphere winter, and increased stockpiles potentially constraining coaluse. However, shocks to supply — such as the El Niño weather pattern
impacting Indonesian exports — could again lead to price increases.

Mine expansions and closures are expected to largely balance out over
the outlook period. Whitehaven’s Vickery project commenced constructionin June 2023. The company is investing $150 million to start up a smallscale version of the mine with first coal expected around mid-2024.
Whitehaven coal is seeking to extend the existing Narrabri undergroundmine. The project has been approved by the NSW Independent Planningcommission but still needs approval under the Federal Environment
Protection and Biodiversity Conservation Act to start. If the projectproceeds it would extend the life of the mine from 2031 to 2044.

Million tonnes

Chinese demand pivoted towards lower grade Indonesian coal following
the commencement of trade restrictions targeting Australia. However,
Chinese buyers are shifting back towards traditional mixes as trade
resumes between the nations.

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 experienced little changed for 2023–24
and have been revised up by $329 million for 2024–25 from theSeptember REQ.

62

Table 6.1: World trade in thermal coal
Annual percentage change

Unit

2022

2023s

2024f

2025f

2023s

2024f

2025f

Mt

1,043

1,047

1,026

1,041

0.4

-2.1

1.5

Asia

Mt

796

898

858

878

12.7

-4.4

2.3

China

Mt

231

302

221

231

30.7

-26.7

4.4

India

Mt

153

150

186

193

-2.4

23.9

3.8

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

197

202

203

10.0

3.0

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 | December 2023

63

Table 6.2: Thermal coal outlook
Annual percentage change
Unit

2022

2023s

2024f

2025f

2023s

2024f

2025f

– nominal

US$/t

324

249

163

131

-23.2

-34.6

-19.2

– realc

US$/t

326

245

156

123

-24.9

-36.2

-20.9

– nominal

US$/t

359

173

138

115

-51.7

-20.5

-16.6

– reale

US$/t

374

174

135

110

-53.6

-22.5

-18.3

Australia

Unit

2021–222022–23

2023–24f

2024–25f

2022–23

2023–24f

2024–25f

Production

Mt

236

216

252

253

-8.5

16.8

0.4

Export volume

Mt

196

182

202

203

-7.2

11.2

0.3

– nominal value

A$m

46,25865,592

36,193

28,792

41.8

-44.8

-20.4

– real valueh

A$m49,26665,80334,71026,759

33.6

-47.3

-22.9

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 | December 2023

64

Resources and Energy Quarterly | December 2023

65

•

•

7.2

Australia’s LNG export revenues held at $17 billion in the September
quarter. In annual terms, earnings are expected to ease from A$92
billion in 2022–23 to A$64 billion by 2024–25, as global energy prices
soften and some supply disruptions resolve.
Geopolitical risks have worsened with the outbreak of conflict in Gaza.
However, seasonal risks have abated as European countries
successfully filled inventories ahead of the northern winter. The priceoutlook is largely unchanged, with winter demand expected to lift prices
from US$12/MMBtu in the September quarter to around US$17/MMBtu
by the March quarter 2024, with gradual declines to follow.

Figure 7.1: Global LNG demand growth forecasts, 2020–25
50
40
Million tonnes•

Summary

Markets remain tight, though signs of easing are evident
Gas markets remain relatively tight, though countervailing pressures areevident. European gas storage has been virtually filled following
successful efforts to pivot off Russian pipeline gas. Weather conditions
across much of Europe have been warm and mild in recent months, andhigh reserves have reduced demand pressure (Figure 7.1), leaving mostcountries well prepared for falling winter temperatures. However, imports
from the Ukraine and Turk stream routes remain well below the preinvasion level of imports from Russia, and the resulting dependency on
shipborne LNG reduces the flexibility of European buyers over the outlook
period.
Asian countries have a mixed demand outlook and significant unfilledstorage capacity. After a weak start to 2023, LNG demand across Asia
surged in the second half of the year, driven by China and India. Demandin Taiwan and South Korea remains more constrained, and nuclear
restarts have reduced LNG demand in Japan. However, growth among
ASEAN nations including Singapore, Indonesia, Thailand and Malaysia
has picked up, with more growth appears likely in the final quarter of 2023.

Resources and Energy Quarterly | December 2023

20
10
0
-10
-30

Longer-term structural pressures should ease after 2025 as the US and
Qatar bring new supply sources online.

World trade

30

-20
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)

Figure 7.2: Global LNG supply growth forecasts, 2021–25
40
30
Million tonnes

7.1

20
10
0
-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)

66

Gas supply appears likely to have grown in net terms in 2023. A number ofgas plants previously out of operation began producing again, thoughprogress has stalled at some newer projects.
Exports are expected to grow from various sources in the US, the Middle
East and Africa. In the US, exports from the Freeport terminal haverecommenced and are expected to add around 11 Bcm to global export
capacity in 2023–24. Supply from Africa is also expected to grow, with
7 Mt of annual gas output expected to come online in Nigeria. This will besupported by output from the new Coral FLNG facility in Mozambique, andby additional feedgas from Algeria and Trinidad. The Greater Tortue plantin Senegal is expected to start supplying additional gas from 2024–25.
On balance, global LNG trade is expected to increase by 52 million tonnes(Mt) over the next two years to reach around 455 Mt by 2024–25.
Gas markets are expected to remain in broad equilibrium over the outlook
period, albeit with relatively high prices and supply risks. This pattern will
likely persist until late 2025 or 2026 when substantial investments in new
supply sources in Qatar and the US start to pay off.

7.3

World imports

European imports edged back, but remain strong
European LNG imports edged back to 23 Mt in the September quarter
2023, to be down by 2% from the September quarter 2022. The recent
surge in European imports (which reflected the rapid build-out ofregassification terminals following Russia’s invasion of Ukraine) now

Resources and Energy Quarterly | December 2023

appears to have levelled out. However, another rise in imports remains
possible if weather conditions deteriorate or relatively weak industrial
demand rebounds more quickly than expected.
European countries have sought to mitigate the risks of shortages bybuilding inventories — which reached virtually 100% of capacity by earlyNovember (Figure 7.3). European inventory movements have gained
additional importance given the loss of access to a traditional source ofgas and the consequent loss of flexibility in gas supply chains.

Figure 7.3: European storage inventories, 2021–23
100
90
80
70
Per cent

The baseline outlook for supply is broadly in line with demand over thenear-term (Figure 7.2), but risks have risen as a result of recent
geopolitical conflicts. The destruction of the Nord Stream pipeline has shut
down a significant channel for gas supply, and the outbreak of conflict in
the Gaza Strip could add further complications and disruptions. Forward
prices rose rapidly in October as markets priced in additional risks, andheld much of the price gain even after it became clear that Europe hadmanaged to insulate itself from potential winter gas shortages.

60
50
40
30
20
10
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).

European demand is expected to grow further over the outlook period,
capturing the largest share of global LNG supply by 2025. European
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. European
imports of LNG are markedly higher than they were prior to Russia’s
invasion of Ukraine (Figure 7.4).

67

Figure 7.4: European LNG imports, 2020–23

capacity, and investment is likely to increase the flow further, though theexact timeframes are vague. China has large gas reserves and significant
potential to bring more domestic supply online. Large pipelines to Russia
and Central Asia have also provided a measure of security to China, which
has significant buying power given its control over much of the global gas
infrastructure.

12

Million tonnes

1086

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

4

9
8

0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2023

2022

2021

2020

Source: Kpler (2023)

China’s imports are expected to be steady through the outlook period
Chinese LNG demand edged up to 18 Mt in the September quarter 2023
as global LNG prices remained well below their peaks of 2022. Higher spot
prices over the previous financial year had weighed on China’s gas use
and created strong incentives to on-sell surplus contracted volumes toEuropean buyers (Figure 7.5). This trend persisted until early 2023, but
eased as prices edged down in the middle of the year.
Australia exported 23 Mt of LNG to China in 2022–23. This was down bynearly 25% on the total for 2021–22. However, relatively strong prices
helped to offset the impact, with Australia’s China earnings holding at
A$20 billion, only marginally below 2021–22 earnings of A$21 billion.
Despite the fall, China remains the second largest destination forAustralian LNG (by volume and value) in 2023, and Australia remains
China’s largest source of LNG.
China’s LNG demand is forecast to remain flat at 70 Mt out to 2025, albeit
with a larger share of demand being serviced by pipeline imports from
Russia. Pipeline capacity between the nations is now operating at fullResources and Energy Quarterly | December 2023

Million tonnes

2

7
6
5
4
3
2
1
0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2023
2022
2021
2020

Source: Kpler (2023)

Japan’s LNG imports have been contained by growth in nuclear power
Japanese LNG imports fell 9% year-on-year in the September 2023
quarter to 17 Mt (Figure 7.6). This represented a recovery in quarterly
terms from the 14 Mt recorded in the June quarter — Japan’s lowest
quarterly LNG imports in over 15 years. The progressive restart of Japan’s
nuclear fleet is expected to result in more downward pressure on LNG
imports over the next decade (see Uranium chapter). Japan remains thelargest destination for Australian LNG, importing 29 Mt of LNG (worth
about A$16 billion) in 2022–23.

68

Figure 7.6: Japan’s monthly LNG imports, 2020-2023
9
7
6
5
4

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

3
2

6

1

5

0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2023
2022
2021
2020

Source: Kpler (2023)

Japan’s total LNG imports are expected to fall to 73 Mt in 2023 and thenremain steady till 2025. Nuclear power is likely to be the only part ofJapan’s electricity sector to grow significantly over the next few years.
Japan’s Ministry of Energy, Trade and Industry expects the share of total
electricity generation supplied by gas to fall from 38% in 2022 to 27% by2030, with the share of nuclear power rising from 6% to 22%. It is not clearthat the new targets will ultimately be met, but the change could beindicative of shifting priorities from the Japanese Government.
South Korean imports are likely to have peaked
South Korea’s LNG imports dropped by 17% year-on-year in the
September quarter 2023 (Figure 7.7). Imports were roughly steady (at9 Mt) in quarterly terms. Australia accounts for about 25% of South Korean
LNG imports and has become a more important supplier in recent years.
LNG is likely to come under additional pressure in South Korea, withdemand forecast to be relatively flat at 41 Mt annually out to 2025. The
Ministry of Trade, Industry and Energy’s 10th Basic Plan aims to lift
nuclear energy’s share of total power generation from 27% to 30% bybuilding additional plants and extending the lifespan of existing plants. This

Resources and Energy Quarterly | December 2023

Million tonnes

Million tonnes

8

represents a significant departure from the previous government’s nuclear
phase-down policy and is accompanied by a proposal to also lift hydrogentargets, though the latter will continue to require co-fired gas power
generation. The latest gas supply plan includes a downward revision in
forecasts for domestic gas needs by 2030, but a slight upward revision in
expected use of gas storage. This creates a potential upside risk for gas
imports to South Korea over the next few years.

4
3
2
1
0

Jan Feb Mar Apr May Jun
2023
2022

Jul Aug Sep Oct Nov Dec
2021
2020

Source: Kpler (2023)

Taiwan’s imports are growing as other energy sources wind backTaiwan’s LNG imports held largely steady at 5 Mt in the September
quarter 2023. Australia remains the largest supplier of LNG to Taiwan,
accounting for around 40% of Taiwan’s LNG supply. The majority of LNG
is used for power generation, and usage is forecast to rise modestly to
23 Mt in 2025 as new gas-fired generation capacity replaces nuclear
power under Taiwan’s long-term decommissioning plan.
LNG use is rising elsewhere in Asia, with investment plans emerging
ASEAN imports have risen since August (Figure 7.8) and are forecast to
grow further: from 19 Mt in 2023 to 30 Mt in 2025. This growth is likely toaccelerate beyond the outlook period, creating strong incentives for new69

investment in gas production. Efforts to lift gas output are alreadyunderway in a range of member nations, with some large regional energy
companies, including Petronas (Malaysia), the Philippines’ Department ofEnergy and PTTEP (Thailand) announcing plans to drill new wells.

China(Shanghai)

Japan(Tokyo)Korea(Incheon)

India(Gujarat)

Western Australia

8

7

8

9

Queensland (Australia)

8

9

9

14

US Gulf Coast (viaPanama Canal)

20

22

21

21

1.2

US Gulf Coast (viaCape of Good Hope)

36

34

35

24

1

American West Coast

10

9

9

19

0.8

Qatar (Ras Laffan)

14

12

13

2

Figure 7.8: ASEAN monthly LNG imports, 2020-2023
1.6
1.4

Million tonnes

Table 7.1: Average LNG Shipping Duration, by LNG region
Days

0.6

Notes: Days shipping is based on a vessel at maximum speeds of 19.5 knots.

0.4

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.

0.2
0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2023

2022

2021

2020

Source: Kpler (2023)

South Asia looking to broaden its import channels
South Asia’s LNG is largely imported from the Gulf region, with strong
infrastructure links allowing rapid transfer between zones: 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 needs.
LNG demand growth is outpacing contracted positions across the region,
forcing greater reliance on spot markets. This is partly a correction fromearlier quarters, when price-sensitive buyers in the region yielded to higher
bids from Europe. However, some growth is also structural and relates torising population and industrialization.
LNG demand is expected to grow particularly rapidly in Thailand,
Bangladesh and Pakistan.

Resources and Energy Quarterly | December 2023

7.4

World exports

The US is becoming an increasingly dominant global exporter
The long boom in US gas production continues, with dry natural gas output
rising by about 5% in the first nine months of 2023 compared with thesame period of 2022. This was driven by expansion from shale sources
including the Permian Basin, where output rose almost 10% in H1 2023.
Supply growth has been sufficient to support higher domestic use as wellas higher exports (Figure 7.9). US LNG exports remained strong through2023, with substantial redirection to Europe occurring after LNG flows
between Russia and Europe were stopped. Over 80% of US LNG wasexported to Europe in 2022–23, and the trend is expected to largely holdas Europe continues to seek reliable alternatives to Russian pipeline gas.
Growth in US LNG exports has been facilitated by a return to normal
shipping at the Freeport export facility, where cargo loading halted foralmost 9 months before resuming in the March quarter 2023. Exports havebeen further supported by a ramp-up at Calcasieu Pass, which has been
producing for around 18 months.

70

Figure 7.9: US LNG exports, 2020–2023

Qatar’s new volumes has been high, with Qatar’s Energy Minister,
predicting that all the new volumes will be contracted out by end 2023.

98

Qatar’s regional dominance as an LNG supplier grew further in recent
weeks with the brief suspension of production at the Tamar field in Israel.
Output from Tamar is directed to Egypt for refining, but the field was shutas a precaution after the outbreak of conflict in Israel and the Gaza Strip.
At the time of writing output from Tamar has resumed, but any further
shutdowns would present a risk to the outlook for gas/LNG.

6
5
4
3

Russian gas exports have fallen, and face further downside risks

2
1
0

Jan Feb Mar Apr May Jun
2023

2022

Jul Aug Sep Oct Nov Dec
2021

2020

Source: Kpler (2023)

North America is expected to become an even larger supplier over theoutlook period. New supply sources include the Canada and Saguaro
Energía (Mexico Pacific) LNG projects (both with nameplate capacity of
28 Mt) which are scheduled for completion by 2025. The US became theworld’s biggest exporter in 2023, and further growth in output will likely lift
its share of global LNG supply from about 20% in 2022 to over 25% by2026. Export flows are expected to remain strong given rising geopoliticaltensions and an expected softening in domestic buying in late 2023.
Qatar is expected to bring sizable new capacity online from 2025
Over the last decade, Qatari export volumes have been relatively stable atabout 80 Mt per annum. Consistent with this trend, Qatari exports werestable at 20 Mt in the September quarter 2023, with the Qatar Government
noting that the nation’s export capacity is currently fully utilised.
More capacity is expected to come online soon, with 6 LNG trains underconstruction at Ras Laffan. On completion, the trains are projected to raise
Qatar’s LNG exports from 79 Mt in 2023 to 105 Mt by 2026. Demand for

Resources and Energy Quarterly | December 2023

Russian natural gas output dropped sharply following the invasion of
Ukraine and the subsequent severing of trade links to Europe. Output is
expected to reach its lowest level for 14 years in 2023, having fallen morethan 20% since 2021. Russian exports of refined LNG have been
marginally more resilient (Figure 7.10), falling by 8% (to 7 mt) through theyear to the September quarter 2023. However, large quantities remain
stranded, causing issues across parts of the Russian supply chain.

Figure 7.10 Russian monthly LNG exports, 2020-2023
3.5
3.0

Million tonnes

Million tonnes

7

2.5
2.0
1.5
1.0
0.5
0.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2023

2022

2021

2020

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)

71However, Russia’s ongoing invasion of Ukraine presents supply and pricerisks. Russia’s pipeline and shipping infrastructure is vast and exposed,and earnings from gas continue to play a significant role in financing theRussian military campaign. Ukraine has yet to mount any attacks on thisinfrastructure, but risks of such an attack could grow under somescenarios.

7.5

PricesPrices are expected to pick up in the short term, but should ease with time
Gas markets have been steadily rebalancing following the cessation of
Russian gas exports to Europe. The surge in prices during 2022 has
gradually unwound. Prices have become less volatile in recent months, but
are expected to remain vulnerable to future shocks as a result of the lossof Russian supply and the greater reliance by many nations on seaborne
product.
Prices declined steadily through early 2023 and settled at around
US$10/MMBtu by mid-year. Prices averaged around US$12/MMBtu in the
September quarter, but are expected to lift to US$17/MMBtu by the March
quarter 2024 as winter demand adds to pressure on gas supplies. As
markets continue to adjust to the war in Ukraine and the loss of Russian
output, prices are expected ease back down to US$12/MMBtu by the endof 2025.

Resources and Energy Quarterly | December 2023

60

120

45

90

30

60

15

30

0
2019

2020

2021

ANEA LNG spot price
Brent crude oil (rhs)

2022

2023

2024

2025

US$ a barrel

Russia is also expected to commence construction of the Power ofSiberia 2 pipeline in 2024. When the pipeline is completed after 2029, it
will allow some stranded Russian gas from Western Siberia to be sold into
the Chinese market.

Figure 7.11: LNG spot and contract prices, 2019–25

US$ a mmBtu

Russian LNG exports are forecast to rise from 31 Mt in 2023 to 39 Mt in
2025 (Figure 7.10). Russia currently has two LNG terminals: Yamal LNG,
which supplies Europe, and Sakhalin LNG, which supplies Asia from
Russia’s far east. A third large scale LNG facility, Arctic LNG-2, is underconstruction, and is forecast to start producing from the end of 2023.

0

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

Recent high gas prices have disrupted a decade-long cycle of strong
growth in gas production and use. Gas has lost competitiveness against
other energy sources, and its position as a price-setting fuel has comeunder greater scrutiny. European countries have legislated a price cap to
contain costs, and caps have also been implemented in Australia’s easternstates. European governments are accelerating renewable construction
timetables, and Asian governments pivoting towards renewable power andnuclear energy. While gas is still growing (strongly in ASEAN countries),
this recent pivot other sources may reduce the ultimate extent of growth ingas demand. Long-term demand for gas will also be influenced byemissions reduction policies of different countries.
The full effect of emerging policies — in conjunction with the reorganisation of gas markets following the invasion of Ukraine — is not fully
apparent yet. The price outlook thus remains subject to significant risks,
weighted to the upside.

72

Prices should settle somewhat beyond the outlook period. with new supply
sources coming online in Qatar and the USA during 2025 and 2026.

expected over the outlook period. Price caps on domestic gas contracts inthe eastern Australian market are not expected to affect exports directly.

High oil prices continue to support LNG contract earnings

Among individual facilities, exports from Woodside’s Pluto facility rose after
Woodside installed new infrastructure at Pluto LNG to enable the facility toprocess gas from the Scarborough Field. Santos’s East Coast facility,
Gladstone LNG, also underwent maintenance in June, and the company isreported to have reduced its output to ensure greater volumes of natural
gas were available to the domestic market.

The price of oil directly affects 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 7.11).
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 should hold up through the outlook period
Australia exported 20 Mt of LNG in the September quarter 2023, largely
maintaining the same level as the September quarter 2022. Exports have
faced headwinds due to maintenance at several different terminals, with
disruptions persisting into the September quarter at the North West Shelf
terminal. The Prelude terminal has also faced maintenance-related falls in
output since August, though this is expected to wind down in November. In
the Northern Territory, the Darwin LNG facility faces temporary closuredue to insufficient feedgas as from its main source, Bayu-Undan,
approaches end of field life.
In response to potential domestic shortfalls after 2023, the West AustralianGovernment has announced a ban on exports which applies to mostonshore gas generated in the State. Western Australia already reserves
15 per cent of its production for domestic usage, and tight enforcement isResources and Energy Quarterly | December 2023

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. Chevroncommenced 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.
Australia is forecast to export 80 Mt of LNG in 2023–24, slightly lower
compared to 2021–22 (83 Mt). Volumes are forecast to edge down to
78 Mt in 2024–25, on lower North West Shelf output (Figure 7.12).
Australia LNG earnings are expected to ease from their recent record
Australian LNG export earnings are forecast to fall to A$73 billion in
2023–24, easing to A$64 billion in 2024–25 (Figure 7.12). Key risks to theforecast include a regional escalation of the Hamas-Israel conflict, as well
as seasonal demand fluctuations that could raise earnings from spot sales.
Exploration expenditure has rebounded
Exploration expenditure grew strongly in the September quarter 2023,
rising by 42% to $329 million. This was 45% higher through the year, andthe strongest quarterly result since the December quarter 2021.

73

100

100

80

80

60

60

40

40

20

20

0

2016–17

2018–192020–21

Volume2022–232024-25

A$ billion

Million tonnes

Figure 7.12: Australia’s LNG exports by value and volume0

Solid quarterly growth was recorded for both onshore exploration (up by
31% to $190 million) and offshore exploration (up 61% to $139 million).
In annual terms, exploration has fallen over recent years (Figure 7.13).
However, the latest result suggests that price surges in 2022 may behaving an effect, with investors showing new confidence about theprospects for Australian gas production and exports.
Revisions to the outlook
Australian LNG export earnings forecasts have been revised up by justover $1 billion for 2023–24 and for 2024–25. This reflects recent
geopolitical events which added to risk and lifted prices slightly relative to
expectations from the September Resources and Energy Quarterly.

Value (rhs)

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

60

6

50

5

40

4

30

3

20

2

10

1

A$ billion

A$ billion

Figure 7.13: Petroleum expenditure, extraction and exploration00
2010–11 2012–13 2014–15 2016–17 2018–19 2020–21 2022–23
Extraction
Exploration (rhs)
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

Resources and Energy Quarterly | December 2023

74

Table 7.2: Gas outlook
Unit

2022

2023

2024

2025

Annual Percentage Change
2023
2024g
2025g

– nominal

US$/bbl

102.7

86.7

86.3

79.3

-15.6

-0.4

-8.2

– reali

US$/bbl

106.9

86.7

84.0

75.3

-18.9

-3.1

-10.3

– nominal

US$/MMBtu

33.2

13.6

15.4

12.7

-59.2

13.6

-17.4

– real

US$/MMBtu

34.6

13.6

15.0

12.1

-60.8

10.5

-19.4

LNG trade

Mt

e

385.3

403.2

425.5

455.6

4.7

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

57.0

53.4

-2.9

-1.3

-6.4

-2.9

-3.0

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

88.3

85.7

6.3

d

Bcm

16.8

15.1

16.5

17.0

-10.3

9.0

3.2

LNG export volume

Mte

83.2

81.5

79.7

78.5

-2.1

-2.3

-1.5

– nominal value

A$m70,571

92,23872,61764,196

30.7

-21.3

-11.6

A$m

78,86596,31072,61762,054

22.1

-24.6

-14.5

– nominal value

A$/GJ

16.1

21.4

17.3

15.5

33.4

-19.4

-10.3

– real value

A$/GJ

17.9

22.4

17.3

15.0

24.7

-22.8

-13.3

– nominal value

US$/MMBtu

12.3

15.2

12.0

11.5

23.8

-21.3

-4.3

– real value

US$/MMBtu

13.7

15.9

12.0

11.1

15.7

-24.6

-7.5

– 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.

Resources and Energy Quarterly | December 2023

75

Resources and Energy Quarterly | December 2023

76

Resources and Energy Quarterly | December 2023

77

Summary The Brent crude price is forecast to fall slightly to average US$83 in
2024, but then fall significantly further to US$76 a barrel by 2025. The
fall will be driven by weak demand and gains in non-OPEC production.
 Australia’s crude and condensate production is expected to fall to about
280,000 barrels per day by 2024–25, as North-West Shelf output falls.
 Australia’s crude and condensate export earnings are expected to lift to
A$13.8 billion in 2023–24 due to a weaker AUD/USD, before falling to
A$11.4 billion in 2024–25 as prices fall and output declines.

8.2

World consumption

Global petrochemical production shifts towards China
Global oil consumption is largely driven by demand from the transport
sector, with industrial use having a secondary, but still substantial, role
(Figure 8.1). Petrol and diesel, primarily used in road transport, accounts
for most of global oil consumption, while jet fuel and kerosene — primarily
used for air travel — makes up a relatively small proportion of usage. LPG,
ethane and naphtha are primarily used in industrial processes, including to
produce the chemicals used to make polymers.
Global oil consumption is estimated by the International Energy Agency(IEA) to have risen by 2.8% year-on-year in the September quarter 2023,
as the short run effects of recovery from pandemic restrictions (particularly
in China) offset a structural slowdown in demand. Chinese consumptionrose by 17% year-on-year, largely due to base effects from the pandemic
restrictions in the September quarter 2022. Chinese consumption is alsostrong when compared with the September quarter of 2021, rising by 12%.
China’s post pandemic rebound unleashed strong pent-up demand forservices, and the recovery in transport demand for oil has been robust.
Domestic aviation demand grew strongly, and China’s Civil Aviation
Administration has released plans which include a 34% increase indomestic flights from 2019 levels by the March quarter 2024. However, therecovery in China’s international air travel volumes has been much
weaker, and remain well below pre-pandemic levels.
Resources and Energy Quarterly | December 2023

Figure 8.1: Global oil consumption by refined petroleum product120
100
million barrels per day

8.1

80
60
40
20
0

2015

2016

Petrol & diesel

2017

2018

2019

Jet fuel & kerosene

2020

2021

2022

2023

Naptha, LPG & ethane

Other

Source: International Energy Agency (2023)

Despite broader weakness in the Chinese economy, China’s industrial
demand for oil strengthened in the September quarter. Chinese
petrochemical plants have raised their capacity over the pandemic period,
allowing for production to ramp up following the removal of pandemic
restrictions.
Increasing petrochemical production in China appears to be displacing
industrial demand across OECD member countries. Total demand from
OECD countries fell 0.3% year-on-year in the September quarter, while
demand for naphtha fell 9.2% year-on-year. The fall in the demand fornaphtha in the OECD was primarily from Western Europe and Asia, with
American demand showing resilience. Demand for petrol and diesel fell by
2.8% year-on-year, driven partly by the rapid adoption of electric vehicles(EVs). Air travel continued to recover from the pandemic. Jet fuel demandacross OECD countries continued to grow strongly in the September
quarter 2023, rising by 10.0% year-on-year, with increased demand acrossmost countries.

78Industrial use to drive consumption growth, while transport demand slows

Figure 8.2: Global passenger vehicle stocks

Global oil consumption is forecast to rise by an average of 1.2% per year
in 2024 and 2025. The growth is expected to be led by industrial fuels —driven by polymer demand — while the growth in the consumption of
petrol, diesel and jet fuel is forecast to slow.

EVs are rapidly gaining market share in the global passenger vehicle
market (see Lithium chapter) as their prices fall. Price falls are flowing from
improvements in battery technologies, incentives from the US Inflation
Reduction Act, and the increasing export penetration of cheaper Chinesemodels. Material cost pressures on batteries — including record lithium
prices in 2022 — acted to slow EV cost declines in 2021 and 2022 but are
now easing as lithium prices fall back.
The share of EVs sold in the global passenger vehicle market is forecast
to exceed 25% by 2025, with strong adoption expected in China, Europe
and the US. The shift in the composition of the global vehicle fleet towards
EVs will accelerate over time as EVs gain market share in new car sales
and will result in an accelerating fall in demand for petrol and diesel.
As a result of increased EV sales, the global ICE passenger vehicle fleet isforecast to plateau over the next two years (Figure 8.2), having grown at
an average annual rate of 3.3% in the four years before the pandemic.
Improved fuel efficiency among the ICE vehicle stock will also contribute to
declining demand, as retiring ICE vehicles tend to be less fuel efficientthan newer models. For OECD countries, the consumption of petrol anddiesel likely peaked in 2019.
Resources and Energy Quarterly | December 2023

1,400
1,200
MillionGlobal polymer demand is expected to rise steadily over the outlook
period, driving industrial demand for oil. Aircraft and vehicles are
increasingly replacing metal components with plastics to reduce weight —and thus improve fuel efficiency — while sensors and other electronic
components in EVs also use additional plastics to produce. Demand frompackaging is also expected to rise, driven by the ongoing growth of ecommerce. The OECD’s Global Plastics Outlook: Policy Scenarios to 2060
published in mid-2022 projects that global plastics use by 2060 will be
triple 2019 levels, with the largest growth by application being in vehicles.

1,600

1,000
800
600
400
200
0

2015
2017
2019
2021
2023
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)

The International Air Transport Association reported that in August, global
kilometres travelled by paying passengers reached 96% of pre-pandemic
volumes, suggesting the rebound in demand from COVID restrictions islargely complete. Jet fuel consumption remains substantially below prepandemic levels due to improvements in aircraft fuel efficiency.
Growth in jet fuel consumption is expected to be slower than the prepandemic trend. Growth in recreational air travel heavily depends on risingincomes in middle income countries, and slower economic growth in China
has weakened the outlook for jet fuel. Policies targeting aviation emissions
in Europe will also reduce jet fuel demand, with the EU planning to phaseout 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, withcurrent electric and hydrogen technologies not yet viable for air travel —long haul or short.

79

8.3

World production

North and Latin American supply rises faster than expected
The IEA estimates world oil production rose by 0.5% year-on-year in the
September quarter 2023. Production from North and Latin American
producers is rising faster than expected, offsetting production cuts by
OPEC+. Production in the US rose by 7.2% year-on-year (1.4 million
barrels a day) in the September quarter 2023, with the US Energy
Information Agency (EIA) attributing the higher-than-expected lift to risingwell productivity, even though the number of active oil-directed rigs has
declined. Production in Brazil rose by 15% year-on-year (by 0.5 million
barrels a day) in the September quarter 2023: new offshore facilities havebeen deployed and are ramping up production.
Spare OPEC crude oil capacity is estimated to have risen to 17% in the
September quarter 2023 (Figure 8.3), which is close to levels seen during
the pandemic. OPEC+ leaders reduced production targets by 1 million
barrels a day in May 2023. Saudi Arabia has further reduced output fromlevels agreed by OPEC by 1 million barrels a day from July and havepledged to do so until the June quarter of 2024. Saudi Arabian output fell
15% year-on-year (by 1.9 million barrels a day) in the September quarter
2023, while output in most other OPEC members fell more modestly.
Despite ongoing sanctions on Iranian oil exports, Iranian production rose
18% year-on-year (by 0.7 million barrels a day) in the September quarter
2023. Iranian exports have helped supply the global market in a period
when Saudi Arabia has cut back on production. However, this increase inproduction — or much of it — may be at risk given the escalation in theHamas-Israel conflict. On 3 November, a bipartisan vote in the US Houseof Representatives passed a bill to strengthen sanctions on Iranian oil,targeting foreign ports and refineries that process Iranian oil.
Russia announced output cuts of 0.5 million barrels a day from levels
agreed at OPEC in August 2023, and then eased the cut — to last until
end 2023 — to 0.3 million barrels a day in September. Russian production
fell 2.4% year-on-year (by 0.3 million barrels a day) in the September
quarter 2023 to 10.8 million barrels a day. The decline in Russian output

Resources and Energy Quarterly | December 2023

comes as the withdrawal of Western companies and bans on technology
exports is resulting in delays for new projects. Russian production peakedin 2019, at 11.6 million barrels a day.
Figure 8.2: OPEC spare crude oil capacity, as a percentage of total
25%
20%
15%
10%
5%
0%

Sep-19Sep-20
Sep-21
Saudi Arabia
Iraq
Iran
UAE

Sep-22
Sep-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)

Russia circumvents Western sanctions on oil exports
Since the invasion of Ukraine, Russian oil trade has diverted away from
OECD countries, and India had become the largest destination for Russiancrude oil exports (Figure 8.4). 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.
Price caps imposed on Russian oil are proving increasingly difficult to
enforce. Russian oil exports are now largely carried by a fleet of older
tankers operating outside of the Western shipping system to circumventthe insurance bans and price caps. The Kyiv School of Economics
estimates that only 31% of Russian seaborne crude oil exports areshipped by tankers using insurance from G-7 and EU firms in September.

80

Figure 8.3: Russian seaborne crude oil and condensate exports

kilobarrels per day

6,000

The US EIA forecasts that US crude output will grow by about 1.9% (orabout 250 kb/d) in 2024. This growth is much lower than in the peak yearsof the shale oil revolution (2012-2019), when US crude oil output grew by
about 800 kb/d per year, with investors remaining cautious about potential
investment in new oil capacity.

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

Sep-19Sep-20China
Other Non-OECD
Other OECD

November 2023 was delayed by a week over disagreement amongst
members on the level of production cuts.

Sep-21

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

Discounts on Russian crude have narrowed substantially since the start of
the year. The IEA weighted average FOB price for seaborne Russiancrude rose to US$82 a barrel in September, above the price caps imposed
by US, EU and Australia. The difference between the Brent crude oil priceand the IEA weighted average FOB price has fallen from US$30 a barrel inJanuary to US$12 in September.
OPEC+ credibility in doubt; US and Latin America to drive supply growth
World oil output is forecast to grow by 1.9% in 2024, driven largely byadditional North and Latin American supply. An OPEC+ meeting on 30
November 2023 announced production cuts of an about 0.9 million barrels
a day from the start of 2024. However, most of the cuts announced arevoluntary from smaller OPEC+ producers such as Iraq and Kuwait, and it
is unclear to what extent these voluntary reductions would be
implemented. Angola, Nigeria and Congo saw official cuts to their quotas.
The production quota cut was rejected by Angola, raising concerns overtensions within OPEC+, undermining its ability to credibly coordinate
production cuts across its members. The OPEC+ meeting on 30

Resources and Energy Quarterly | December 2023

Latin American nations are expected to add to global supply over theoutlook period. The IEA is expecting Brazil to add about 300 kb/d to global
crude supply in 2024, with Brazil’s state-owned oil company Petrobras
expected to deploy additional offshore platforms over the period. Brazil is
expected to join OPEC+ in 2024 but has declared it does not intend toaccept production quotes from the organisation.
New supply is also expected from Guyana. After a series of discoveries
from 2008, offshore production in Guyana began in 2019, and projects
currently in the pipeline are expected to continue to bring additional
capacity online. The IEA forecasts Guyana output will rise by 210 kb/d toabout 600 kb/d in 2024. About 66% of Guyana, including much of its oil
reserves, is territory disputed by Venezuela. Both Guyana and Venezuela,
as well as Brazil, have lifted their military presence along the border afterVenezuela raised rhetoric exerting its claim on the territory.

8.4

PricesOil market to tighten as OPEC+ cuts back supply and demand recovers
Crude oil prices slid over H1 2023 (Figure 8.5), partly due to weak Chinesedemand. China’s economy showed weaker than expected growth after
pandemic restrictions were dropped in late 2022. The price fall was also
driven by slower OECD economic growth as central banks continued totighten monetary policy. In the June quarter, output cuts by some OPEC+
producers saw price declines slow. Prices rallied in the September quarteron concerns that OPEC+ output cuts would deplete inventories too much,
but most of those gains were lost in October as higher-than-expected nonOPEC supply pushed up OECD oil inventories (Figure 8.6).

81

The Brent crude price is forecast to fall slightly to average US$83, then to
decline to average US$78 a barrel by 2025. Higher than expected
production from North America and Latin America, combined with slowing
demand growth, is expected drive this price fall.

8.5

Australia

Figure 8.4: Price outlook
120
100
US$ a barrel

Since the Russian invasion of Ukraine, the US government has sold close
to half the oil held in the Strategic Petroleum Reserve and has delayedplans to restock in H2 2023 while OPEC+ cut back on supply. The US is
now seeking 3 million barrels of oil for early 2024 delivery.

Export earnings are forecast to rise by 4.5% to $13.8 billion in 2023–24(Figure 8.8), as a weak AUD/USD lifts the average Australian dollar oil
price compared to 2022–23. Export earnings are forecast to fall to$11.4 billion in 2024–25, with lower domestic production driving downexport volumes, and prices expected to fall as non-OPEC production rises.

400Dec-17

Dec-19Dec-21

Dec-23

Brent

West-Texas IntermediateDec-25

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

Figure 8.5: Change in OECD Petroleum Stocks
300
250
q/q change (million barrals)

Australian crude oil and condensate output fell 10% year-on-year to 255
kb/d. The fall was due to lower output in the Carnarvon Basin, which isapproaching end of life. This includes fields such as the North-West Shelf
and Greater Enfield. Output is forecast to fall further over the outlook
period to 280 kb/d in 2024–25, as Carnarvon Basin fields deplete further.

60

20

Delays over investment decision causing uncertainty over outlook
Australian crude oil and condensate export earnings fell 15% year-on-year
to $3.1 billion in the September quarter 2023, as prices fell back fromelevated levels triggered by the Russian invasion of Ukraine in 2022.
Export volumes were little changed, despite a fall in domestic production.
This is partly due to Australian refineries switching from domesticallysourced feedstock to imported feedstock. Also contributing is a larger thannormal discrepancy between available production, import/export andinventory estimates. The top destinations for Australian exports over thequarter were Singapore and China (Figure 8.7).

80

200
150
100
50
0
-50
-100
-150
-200
Sep-18

Sep-19Sep-20

Sep-21Government

Industry

Sep-22

Sep-23

Source: International Energy Agency (2023)

Resources and Energy Quarterly | December 2023

82

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 products rose by 3.6% year-on-year
in the September quarter 2023. The gain was driven by a 32% lift in usageof aviation turbine fuel and reflects the ongoing recovery in air travel since
the opening of Australia’s international borders in November 2021.
Consumption of automotive gasoline fell 2.5% year-on- year. Rising
adoption of electric vehicles is expected to reduce demand for petrol.
Exploration
Australia’s petroleum exploration expenditure was $330 million in the Junequarter 2023, up 45% year-on-year (see Figure 7.16 in the Gas chapter).
Offshore exploration rose 112% year-on-year to $139 million, while
onshore exploration spending rose by 18% year-on-year to $190 million.
Revisions to forecasts
Since the September 2023 Resources and Energy Quarterly, the forecast
for Australia’s crude and condensate export earnings has been revised
down 5.4% (to $13.8 billion) in 2023–24 and down 4.3% (to $11.4 billion)
in 2024–25. The revisions are due to a weaker outlook for global oil prices
and a downward revision to forecasts of Australian production.
Resources and Energy Quarterly | December 2023

1000
800
600
400
200
0

Singapore

China

Malaysia
Jun-23Thailand

S. Korea

Other

Sep-23

Source: Australian Bureau of Statistics (2023)

Figure 8.8: Australian crude oil and condensate exports
300

15

240

12

180

9

120

6

60

3

0

2016–17

2018–192020–21
Volumes2022–23

2024–25

A$ billion

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 Australian Government to remain open until at least
2027, in exchange for a subsidy on each litre of refined product sold.

1200

million AUD

Australian refineries to remain open with government support

Figure 8.7: Australian crude and condensate exports, by destination

kilobarrels per day

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.

0

Values

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

83

Table 8.1: Oil Outlook
Percentage changes

World

Unit

2022

2023 s

2024f

2025f

2023f

2024f

2025f

Productiona

mb/d

100

102

103

105

1.7

1.2

1.7

Consumptiona

mb/d

100

102

103

104

2.4

0.9

1.5

– nominal

US$/bbl

95

80

78

72

-15.6

-1.9

-7.9

– real

US$/bbl

98

80

76

69

-18.9

-4.6

-10.1

– nominal

US$/bbl

100

85

83

76

-15.0

-2.7

-8.0

– real

US$/bbl

104

85

80

72

-18.3

-5.4

-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
kb/d

337

291

286

277

-13.4

-1.8

-3.3

a

Export volume

kb/d

290

282

284

267

-2.9

1.0

-6.2

– Nominal value

A$m

14,031

13,192

13,787

11,385

-6.0

4.5

-17.4

– Real value

A$m

15,68013,774

13,787

11,005

-12.2

0.1

-20.2

Importsa

kb/d

180

169

182

188

-5.9

7.4

3.3

LPG productionacd

kb/d

107

93

95

91

-13.5

2.1

-4.1

– Refinery productiona

kb/d

266

252

250

247

-5.3

-0.9

-1.4

ae

– Export volume

kb/d

8

6

5

4

-34.1

-12.9

-18.5

– Import volumea

kb/d

743

856

884

884

15.1

3.3

-0.1

– Consumptionag

kb/d

934

1,021

1,036

1,038

9.3

1.5

0.2

ProductionachRefined 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 and Resources (2023); Department of Climate Change, Energy and Environment (2023).

Resources and Energy Quarterly | December 2023

84

Resources and Energy Quarterly | December 2023

85

9.1






9.2

Summary
Supply disruptions and renewed interest in nuclear power have resulted
in prices rising to US$81 a pound in the early part of the December
quarter, revising up the price and value forecast.
Prices are now forecast to climb to around US$92 a pound by 2025,
driven by a structural market deficit. Australian exports are forecast to
increase from around 4800 tonnes in 2022–23 to around 5700 tonnes
by 2024–25. This growth reflects the expected opening and ramp-up of
production at Boss Energy’s Honeymoon mine in South Australia.
Price and volume growth are expected to lift uranium export values from
A$812 million in 2022–23 to A$1,539 million by 2024–25.

World Consumption

Global appetite for nuclear power is rising
Global uranium demand is primarily driven by nuclear reactors utilisinguranium as fuel. Nuclear reactors require regular refuelling and have very
long ramp up and ramp down procedures. Therefore, once built a nuclear
reactor’s consumption generally remains steady over time. Worldwide
reactor demand is estimated to reach 88 kilotonnes (kt) in 2023, with the
US accounting for 21 kt and China using 14 kt (Figure 9.2).
Total nuclear energy production capacity is rising as nuclear deployments
gather pace and countries look to utilise nuclear power to improve energy
security and meet their net zero commitments (Figure 9.1). As part of thisincreased appetite for nuclear power, small modular reactors (SMRs) andmicroreactors are receiving significant attention. These have advantages
over conventional reactor technology in the comparatively short
construction timeline and lower absolute capital cost of a typical reactor.
Growth in their use could increase demand for uranium relatively quickly.
Increased demand for uranium is underpinned by new reactors in North
America, Asia, and Eastern Europe.
In the US, after a long period of low spending, multiple SMR andmicroreactor projects have recently progressed, with deployment of

Resources and Energy Quarterly | December 2023

Figure 9.1: Growth in world nuclear power generation
Electrical capacity added (gigawatts) actual and expected
0

10

20

EU countries

Japan

30

40

1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
US

China

Others

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

86China has a total of 27.3GWe of capacity under construction across
24 projects. These include the Lianjiang 1 plant, which begun construction
in October 2023 after gaining approval from the Chinese State Council.
Successful completion of all 24 projects would increase China’s total
nuclear generation capacity from 53.2GWe to 80.5GWe. Some of theseprojects are being commissioned or are expected to begin commissioning
in the coming months.
Belarus’ second reactor reached commercial production in November
2023. The two reactors, built by Rosatom, are expected to account for
40% of the country’s electricity generation. Poland has also madeprogress, with regional authorities backing the building of three plants in
the Pomerania region with a total capacity of 3750 MWe.

9.3

World production

Production is growing, but disruptions could affect short term supply
Kazakhstan is the single largest producer of uranium in the world,
producing 24.7kt, from a total of 62.7kt mined world-wide in 2023.
Australia is on target to produce 5.3kt in 2023, or 8.5% of world mined
supply. Inventories and secondary sources (such as depleted uranium
reprocessors) provide additional supply to global markets and help to keep
overall supply and demand in balance.

Resources and Energy Quarterly | December 2023

100
80
Thousand tonnes

India’s Kakrapar 3 reactor has entered commercial generation, with fuelloading underway at Kakrapar 4 (700MW). Both reactors are Indian
designed, and their successful deployment represents a substantial
expansion of India’s nuclear capabilities. India plans to build a further
14 similar reactors.

Figure 9.2: World uranium consumption and inventories (U3O8)

60
40
20
0
2013
China
United States

2015

2017

European Union
Others

2019

2021

Japan
Inventories

2023

2025

RussiaTotal production

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

Figure 9.3: World uranium output (U3O8)
100
80
Thousand tonnes

Xe-100(60MW) reactors in Washington and Texas receiving approval.
Three microreactor projects have also received approval. SMRs andmicroreactors are being examined as a substitute for fossil fuel-based
generation in places where traditional reactors are impractical, would havetoo much capacity or would be too expensive to build — such as in remoteor rural communities.

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);
UxConsulting (2023)

87

Higher prices have seen Kazatomprom (the world’s largest uranium
supplier) revise up its uranium production targets in Kazakhstan. In 2017,
Kazatomprom production was scaled down to 80% of the subsoil use
agreements. In 2022, Kazatomprom announced an increase in productionof up to 90% in 2024. Production targets for 2025 have also been revised
up to 100% of subsoil use agreements.
Cameco has revised down its 2023 production forecast after disruptions at
two of its Canadian facilities. Cigar Lake (the world’s highest-grade
uranium mine) experienced disruptions due to ‘equipment reliability
issues’. McArthur River/Key Lake facility (the world’s largest high-grade
uranium mine and mill) has also experienced issues in resuming
production after three years of care and maintenance. The lack ofpersonnel with the appropriate skills and availability of materials has
impacted the restart. Overall, these disruptions are forecast to reduce
production at the site from 10000 tonnes to 8800 tonnes.
In July 2023, a coup d'état in Niger added to the risk of potential
disruptions to uranium mining, which accounts for 4% of world output.
Following the coup d'état, Global Atomic Corporation warned of a potential
6–12-month delay to the project. Niger’s new government has shown ‘full
government support’ for the Global Atomic Corporation’s Dasa uranium
project. However logistical issues remain, and getting supplies to the site
has proven difficult.

9.4

PricesPrices rose sharply in H2 2023
Uranium prices rose sharply in September-November 2023, from US$59
to US$81 a pound (Figure 9.4). The price rise occurred after two events in
September: the downward revision of Cameco’s output forecast (seeResources and Energy Quarterly | December 2023

Figure 9.4: Uranium price outlook
120
100
US$ a pound

World supply is growing slowly, but shortfalls through the middle of thisdecade are still expected (Figure 9.3). Higher prices have encouragedsome large companies to lift production from existing assets. However,equipment issues, lack of personal with appropriate skills and politicalinstability have also disrupted some potential supply.

80
60
40
20
0
2011

2013

2015

2017
Spot

2019

2021

2023

2025

Contract

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

World Production section), and an announcement by the World Nuclear
Association that uranium consumption would need to double by 2040 tomeet net zero commitments.
The reduction in supply from Cameco adds to pressure on global spot
markets. Yellow Cake PLC — a publicly traded uranium holding fund —also purchased 692 tonnes in October. Yellow Cake PLC is one of manyfinancial institutions that have been operating in the uranium market since
2018.
Prices to remain high and will grow further, greater volatility also expected
Exploration and development of new mines is increasing to meet demand.
However, new mining capacity typically takes years to come online, and is
not expected to close supply shortfalls over the outlook period.
The commercial utilities stockpile is expected to deplete by half by 2024,
and to halve again by 2025. Combined with the structural production
deficit, this is expected to put further upward pressure on prices over the
next two years. As inventories decline, price risks become weighted to the88upside. Risks include the possibility of production shortages and supply
constraints affecting large companies such as Kazatomprom.
Growing interest from financial institutions such as holding funds — whobuy uranium for speculative purposes — could add volatility to markets
over coming years. However, uranium is traditionally contracted off-market
many years in advance, with only 11% of total volume traded on the spot
market since 2004. Uranium markets thus have some insulation against
speculative bubbles.

9.5

Revisions to the outlook
Export earnings forecasts for 2023–24 and 2024–25 have been revised up
by $260 million and $584 million (respectively) since the September
Resources and Energy Quarterly. This reflects the recent sharp
strengthening in the price outlook.

Figure 9.5: Australia's uranium exports
9

1800

6

1200

3

600

Australia

A mine at Mulga Rock is also under development, but commercial
production is not expected within the outlook period. Higher prices may
also expedite exploration and the development of new mines in Australia.
However, given the typical mine development timeline any additional
capacity will come online outside the outlook period.

A$ million

Australia’s uranium exports are currently generated from the Four Mile andOlympic Dam mines. However, two additional mines are now underdevelopment. One of these is Boss Energy’s Honeymoon mine(reactivation project). Boss Energy has announced that the mine will
re-commence production by the end of 2023, with work now close tocompletion. All major wellfield preconditioning tasks are now complete,
and the mine is expected to produce 1,100 – 1,200 tonnes of uranium for 9
years after a ramp up period.

Thousand tonnes

Higher prices and volumes will boost export earnings.

0
2012–13

2016–17
Export volumes

0
2020–212024–25
Export values (rhs)

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

Higher prices and an additional mine opening are expected to pushearnings to a decade high in the current financial year (Figure 9.5).
Exports are expected to be A$1,222 million in 2023–24, with further growthin subsequent years as Honeymoon ramps up. The rise in the spot price is
expected to result in a total revenue of A$1,539 million by 2024–25.

Resources and Energy Quarterly | December 2023

89

Table 9.1: Uranium outlook

Annual percentage changes2024 f

2025 f

9.4

12.5

7.6

12.3

6.8

15.5

8.9

16.3

16.3

58.1

18.8

0.0

24.8

27.3

29.6

-0.9

10.2

8.5

3.0

3.1

3.1

3.1

3.7

0.0

0.0

kt

76.3

87.8

88.2

89.2

15.1

0.5

1.1

China

kt

11.3

13.8

14.4

17.4

22.3

4.1

21.4

European Union 28

kt

17.8

20.1

20.6

18.9

12.7

2.4

-8.0

Japan

kt

1.6

2.9

2.9

2.9

79.0

0.0

0.0

Russia

kt

7.9

7.5

7.0

6.7

-4.6

-7.8

-3.4

United States

kt

20.7

21.5

22.7

21.5

3.7

5.5

-5.3

– nominal

US$/lb

49.8

61.7

84.4

89.7

23.9

36.8

6.4

US$/lb

51.8

61.7

82.1

85.2

19.0

33.0

3.9

Australia

Unit

2021–222022–23

2023–24 f

2024–25 f

2022–23

2023–24 f

2024–25 f

Production

t

4,485

5,409

5,588

6,167

20.6

3.3

10.4

Export volume

t

4,933

4,809

5,441

6,167

-2.5

13.1

13.3

– nominal value

A$m

564

812

1,222

1,539

43.8

50.5

26.0

A$m

630

847

1,222

1,488

34.4

44.2

21.8

Average price

A$/kg

114.4

168.7

224.5

249.5

47.5

33.1

11.1

– real d

A$/kg

127.8

176.2

224.5

241.2

37.9

27.4

7.4

World

Unit

2022

2023

Production

kt

57.4

62.8

70.7

76.0

Africa b

kt

9.2

9.8

11.3

Canada

kt

8.7

13.7

Kazakhstan

kt

25.0

Russiakt

Consumption– realc– real value

d

2024

f

2025

f

2023

s

Notes: b Includes Niger, Namibia, South Africa, Malawi and Zambia; c In 2023 US dollars; d in 2022–23 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 | December 2023

90

Resources and Energy Quarterly | December 2023

91

Resources and Energy Quarterly | December 2023

92

10.1






Summary

After averaging US$1,930 an ounce in the September quarter 2023,
gold rose to above US$2,000 an ounce in November following the onsetof conflict in the Middle East. Prices are forecast to remain elevated but
soften gradually to average around US$1,830 an ounce in 2025.
Australian gold production decreased to 72 tonnes in the September
quarter 2023 due to lower grades, planned maintenance and several
mines put in care and maintenance. Production is forecast to be steadydue to project delays.
Higher volumes will lift exports to $27 billion in 2023–24 from $24 billion
in 2022–23. Price falls will then cut exports to $21 billion in 2024–25.

10.2

World consumption

World gold usage declined over the year to September quarter 2023
World gold demand decreased by 5.9% year-on-year to 1,147 tonnes in
the September quarter 2023. This was driven by a 27% decline year-onyear in central bank demand, following a record September quarter 2022.
Official sector (central banks and other government financial institutions)buying declined year-on-year to 337 tonnes in the September quarter.
Despite the fall, official sector demand was well above the 10-year
average (143 tonnes) and year-to-date buying was a record 800 tonnes.
Official sector demand has been strong since mid 2022, with purchases
dominated by emerging market central banks eager to lift gold reserves.
According to World Gold Council (WGC) data for declared purchases,
buying in the September quarter 2023 was again dominated by China(78 tonnes). The National Bank of Poland (NBP) also purchased
57 tonnes, bringing year-to-date purchases to 105 tonnes. The Presidentof the NBP said this gold accumulation makes Poland a more credible
country, and stated the central bank intends to continue building its gold
reserves. Türkiye reported a return to net purchasing during the quarter(39 tonnes), following a brief period of selling gold domestically in H1 2023
— a result of strong domestic demand and a temporary ban on gold

Resources and Energy Quarterly | December 2023

imports. Sales by central banks during the September quarter werecomparatively small, with Kazakhstan selling 4 tonnes from its reserves.
Gold purchases by non-government buyers in the September quarter 2023
were slightly higher year-on-year, with weaker demand from consumers(jewellery, gold coins and bars) offset to some extent by lower outflows
from gold-backed exchange-traded funds (ETFs).
ETF outflows reached 139 tonnes in the September quarter 2023, an
improvement in gold demand compared to 244 tonnes of outflows a year
earlier. (ETF outflows are counted as reducing gold demand, while inflows
are counted as additional.) Demand for ETF gold was particularly weak inWestern markets, due to rising bond yields and a strong US dollar.
Retail investment in gold bars and coins declined by 14% year-on-year in
the September quarter 2023. Year-on-year declines were partly driven by
weaker demand in the West and by base effects — following strong
demand from Türkiye and the Middle East in 2022. Failing to offset thesedeclines, bar and coin investment demand was strong in the larger
markets of China (up by 16% year-on-year) and India (up by 20%).
Demand in China was supported by economic uncertainty and a weak
performance from other asset classes (such as property), with record
domestic prices supporting the case for gold as a store of wealth. Physicalinvestment in India was supported by a correction in domestic prices
following a peak in the June quarter 2023, with buyers stocking up aheadof the wedding and festive seasons in the December quarter.
Gold jewellery demand declined marginally year-on-year in the September
quarter 2023, driven by elevated — in some cases, record — gold prices
in many markets as the US dollar rose. Jewellery demand in China fell by
6% year-on-year to 154 tonnes in the September quarter 2023. The yearon-year decline was partly due to high domestic prices, but also a result ofa strong September quarter 2022 base. According to the WGC,
consumers responded to elevated prices by purchasing jewellery withlower average weight or gold content. Bucking the trend, Indian jewellery
demand rose year-on-year in the September quarter 2023 as consumers
responded to a correction in prices from record highs.

93

Weak demand for consumer electronics in the September quarter 2023
also translated to weak demand for gold in electronics — such as in lightemitting diodes (LEDs), memory chips and printed circuit boards. This
lowered demand from this sector by 3% year-on-year to 75 tonnes.

improvement in consumer sentiment and rising incomes, particularly in the
key markets of China and India. Lower gold prices and a weaker US dollar
are expected to drive a particularly strong recovery in jewellery demand
after 2023, with an increase of 7.3% a year.

Lower investor demand has weakened gold consumption in 2023

Physical (bar and coin) demand is expected to remain strong, as ongoing
economic uncertainty and forecast price declines support buying activity
near — or above — recent elevated volumes.

After a very strong 2022, world gold consumption in 2023 is estimated todecrease by 5.8% to about 4,400 tonnes. The decline is expected to bemainly driven by lower investment demand, with official sector demandalso easing from record levels in 2022 (Figure 10.1).
Investment demand (gold-backed ETFs or bar/coin holdings) is expected
to fall by 11% in 2023 as strong ETF outflows through the year outweighresilient physical gold demand. Physical demand has been supported byongoing geopolitical and economic uncertainty.
Jewellery consumption in 2023 is estimated to be slightly below last year,
as high local gold prices constrain demand in key markets such as India.
Despite strong demand in China over H1 2023, recent price rises are
expected to weaken that growth leading into the next seasonal peak.

Official sector demand is forecast to soften to about 700 tonnes a year by2025. Buying is expected to be driven by emerging market central banks,
who will continue their long term aim to diversify 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 and restricted access to its foreign reserves, it is likelythat Russian official sector demand will be strong over the outlook period.

Figure 10.1: World gold demand by sector
5,000
4,000

World gold consumption is forecast to stabilise below recent elevatedlevels, reaching about 4,450 tonnes by 2025. Demand growth over thistime is expected to be largely driven by rising jewellery consumption and arecovery in demand for high tech manufacturing. Official sector demand isforecast to ease from recent record levels but remain relatively high, while
investment demand is forecast to steady above 2023 levels (Figure 10.1).
Investment demand is forecast to average about 1,100 tonnes over theforecast period. 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.
Jewellery consumption is forecast to grow strongly from 2024 onwards toreach 2,350 tonnes by 2025. Consumption will be supported by an

Resources and Energy Quarterly | December 2023

tonnesGold consumption to grow over the medium-term

3,000
2,000
1,000
0

2017

2018

2019

2020

2021

Jewellery fabrication
Central banks & other institutions

2022

2023

2024

2025

Investment
Technology

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)

94

10.3

World production

World supply increased in the September quarter 2023
World gold supply increased by 6.4% year-on-year to about 1,270 tonnes
in the September quarter 2023, driven by both higher mine production andincreased recycling.
Global mine production rose to a record 971 tonnes in the September
quarter 2023. Growth was led by increased production from the major
producers.

World supply to stabilise as mine supply growth slows
Global gold supply is forecast to stabilise above 4,800 tonnes in the period
to 2025, with increasing world gold mine production offset by decreasing
supply from recycling activity (Figure 10.2).
World gold mine production is forecast to rise by 1.4% a year on averageby 2025 to 3,780 tonnes, led by gains in Canada, the US, Chile and Brazil.

Production in China — the world’s largest gold producing nation — fellmarginally year-on-year to 93 tonnes in the September quarter 2023.

Canadian mine output is forecast to rise by 24% from 2023 to 2025, toreach 249 tonnes. Gains will include the 11 tonnes per year Côté project
and the 10 tonnes per year Blackwater project, both commencing
operations in the next two years.

Production in the United States rose by 13% year-on-year to about
48 tonnes in the September quarter 2023, due to increased output fromthe Carlin, Cortez and Turquoise Ridge operations in Nevada.

Continued environmental regulations and industry consolidation in China is
expected to see production fall over the medium-term, however China isunlikely to lose its seat as the world’s largest producer.

Production in Canada fell by 6.8% year-on-year to about 45 tonnes in the
September quarter 2023. Lower production was reported across allprovinces, for example production was down by 24% year-on-year at the
8.9 tonnes per year Brucejack project and by 13% year-on-year at the 21
tonnes per year Detour Lake project. The 7.6 tonnes per year Eléonore
project in Quebec ramped back up to full production during the quarter
following a temporary closure due to wildfires in June.

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.

Gold recycling in the September quarter 2023 rose year-on-year to
289 tonnes, largely due to stronger gold prices in China and India.
Recycling activity was weaker than expected (given high domestic prices)in Egypt and Türkiye, as economic uncertainty and ongoing currency
weakness in those countries reduced consumers’ willingness to sell gold
for recycling.

5,000
4,000

TonnesIn Australia — the world’s third-largest gold producing nation — output
decreased by 2.5% year-on-year in the September quarter 2023, to
73 tonnes. Australian mine production fell due to lower mine grades,planned maintenance and several mine closures (see Australia section).

Figure 10.2: World gold supply

3,000
2,000
1,000
0

2017

2018

2019

2020

2021

Mine production

2022

2023

2024

2025

Scrap

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

Resources and Energy Quarterly | December 2023

95

Figure 10.3: Gold price and real US 10-Year Treasury yield
2,100

-1.4

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 credible
government bonds) increases the so-called market “risk-free rate”, andhence the opportunity cost of holding gold (pushing prices down).

1,900

-0.9

1,700

-0.4

1,500

0.1

1,300

0.6

1,100

1.1

900

1.6

700

2.1

500

2.6

300

3.1

The London Bullion Market Association (LBMA) gold price is estimated tohave averaged about US$1950 an ounce over the second half of 2023 —13% higher than in 2022. Price support has come from ongoing strength incentral bank purchasing, economic uncertainty and geopolitical risk.
Gold prices averaged about US$1,930 an ounce in the September quarter
2023. Prior to the conflict in the Middle East, pressures from surging bondyields and a strong US dollar were pushing gold prices lower — declining
by 6.4% over 2 weeks to a low of US$1,820 an ounce on 5 October(Figure 10.4).
The gold price rose sharply after the Hamas-Israel conflict started,reaching the US$2,000 an ounce mark in late October on strong safehaven demand. Gold prices were also given a boost by falling US
Treasury yields and a weakening US dollar — as markets priced in thecompletion of the US monetary tightening cycle and commencement ofmonetary easing in 2024. As at 1 December 2023, gold prices surged to
US$2,072 an ounce, a new record high.

100
Dec–07

Dec–11

US$ gold priceDec–15

3.6
Dec–23

Dec–19Real US 10 Year Treasury bond yield (inverted, rhs)

Source: Bloomberg (2023); LBMA (2023) Gold price PM

Figure 10.4: Gold price and the US dollar in H2 2023

US$ an ounce

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 (Figure 10.3). Thishas persisted as a driver since, muting the effect of rising interest rates.

US$ a troy ounceGold prices surged in October on geopolitical concerns%

Prices

2,100

108

2,050

106

2,000

104

1,950

102

1,900

100

1,850

98

1,800
Jul-23Aug-23

Sep-23

US$ gold priceOct-23

Nov-23

Index

10.4

96
Dec-23US dollar index (rhs)

Notes: The dashed line indicates 6 October 2023
Source: Bloomberg (2023); LBMA (2023) Gold price PM

Resources and Energy Quarterly | December 2023

96Gold prices to decline over the forecast period, but remain elevatedGold prices are estimated to average about US$1,940 an ounce in 2023
— a slight upward revision compared with the September 2023 Resources
and Energy Quarterly. Prices have gained support from declines in bondyields and a lift in safe-haven demand.
Prices are forecast to decline throughout 2024, centred around a scenario
where US economic activity slows but does not go into recession(Figure 10.5). In this scenario, real US interest rates will remain high in linewith current market expectations, leading to further declines in gold prices.

3,000

3,000

2,500

2,500

2,000

2,000

1,500

1,500

1,000

1,000

500

500

0
2017 2018 2019 2020 2021 2022 2023 2024 2025
US dollar gold price0Australian dollar gold price (rhs)

Source: Department of Industry, Science and Resources (2023); LBMA (2023) Gold price PM

However, price forecasts have been revised up over the short-term, inrecognition of ongoing strength from safe-haven and central bank demand.
Gold prices have continued to hold up remarkably well despite downward
pressure from various sources such as high real yields, a strong US dollar
and continued ETF outflows. Official sector buying is expected to continue
at strong levels and some degree of geopolitical risk premium is expected
to persist, beyond what was expected in the September 2023 Resources
and Energy Quarterly.

Resources and Energy Quarterly | December 2023

Gold prices are forecast to fall by 2.9% a year to an average of around
US$1,830 an ounce in 2025, due to pressure from high real interest rates(as global inflation eases) and a gradual easing of safe-haven demand.
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$2,530 an ounce in 2025.

A$ a troy ounce

US$ a troy ounce

Figure 10.5: US and Australian dollar gold prices

If US (and global) economic activity declines substantially and interest ratecuts — not currently expected by US Fed officials and some market
participants — come to fruition in the first half of 2024, this could create amore supportive environment for gold and see a stronger price outcome
than forecast. Ongoing support for the gold price would possibly comethrough lower real interest rates, a weaker US dollar and demand for gold
ETFs — as equity markets likely soften.

10.5

Australia’s trade, production and exploration

Australian gold exports rose in the September quarter 2023
Australia’s gold exports rose by 20% year-on-year to $8.0 billion in the
September quarter 2023. The gain was driven by higher Australian dollar
gold prices (up by 16%) and a lift in export volumes.
Growth in Australian exports was led by a 25% year-on-year increase to
the financial hubs (US, UK, Switzerland, Hong Kong and Singapore),
which collectively purchased $3.8 billion worth of gold. Within the financial
hubs, exports to the United Kingdom increased to $1.2 billion (from zero in
September quarter 2022) and exports to Hong Kong doubled year-on-year
to $1.8 billion. Gold exports to China fell by 9.1% to $2.0 billion year-onyear, while exports to India more than tripled to $1.5 billion.
Australian gold export earnings to decline over the medium-term
Australian gold export earnings are forecast to increase in 2023–24 by
8.7% to $26.5 billion. Growth will be driven by 15% year-on-year growth inexport volumes and a strong September quarter 2023 result. Export
earnings are then forecast to decline by 20% to $21.3 billion in 2024–25
due to lower forecast prices and export volumes (Figure 10.6).

97

420

30

350

25

280

20

210

15

140

10

70

5

0

2014–15 2016–17 2018–19 2020–21 2022–23 2024–25
Mine production

Export volume

A$ billion

TonnesFigure 10.6: Australian gold exports and mine production

0

Export value (rhs)

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

Australian gold mine production decreased in the September quarter 2023
Australia’s gold industry produced 73 tonnes of mined gold in the
September quarter 2023, down by 2.5% year-on-year. Production was
lower in some cases due to lower grades and major planned outages formaintenance. Production was also down year-on-year in some cases due
to some mines having entered care and maintenance during the year.
Production at Newmont’s (having recently acquired Newcrest) 19 tonnes
per year Cadia mine in NSW fell by 14% year-on-year to 3.8 tonnes in the
September quarter 2023. Falls in production were driven by lower grade
and reduced mill throughput resulting from major planned shutdown
activities. Cadia continued ramp up activities from its new panel caveproject PC2-3 during the 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.
Production at Northern Star’s 13.4 tonnes per year KCGM operation was
down by 16% year-on-year in the September quarter 2023, at 2.8 tonnes.
Lower production was due to planned increases in waste material

Resources and Energy Quarterly | December 2023

movement (rather than ore movement) ahead of the planned transition to
the higher-grade Golden Pike North cutback in the first half of 2024. Lower
grades and planned mill shutdowns also led to production decreasing by
12% year-on-year at the company’s 7.6 tonnes per year Carosue Dam,and by 14% at the 10 tonnes per year Jundee Gold Operation. Meanwhile,
the recently expanded Thunderbox mill ramped up to reach nameplate
capacity during the quarter, resulting in production more than doublingyear-on-year to 1.8 tonnes.
Compensating for lower open pit output at Evolution’s Mungari project,production at the 8.6 tonnes per year Cowal operation increased by 22%
to 2.1 tonnes in the September quarter, as ore production continued toramp up from its new underground mine. Operations also returned tonormal at Evolution’s 2.5 tonnes per year Ernest Henry project, following
outages in the first half of 2023 related to heavy rainfall.
BHP’s 5.8 tonnes per year Olympic Dam mine continues to set records,
delivering 1.6 tonnes of refined gold in the September quarter 2023. Goldproduction from Olympic Dam has grown as a result of additional
concentrate feed in from the recently acquired Prominent Hill andCarrapateena assets — which collectively produced 1.1 tonnes of gold inconcentrate.
First gold was poured at the 6.2 tonnes per year Bellevue Gold Project in
October 2023, with work now focused on ramping up mining andprocessing operations towards nameplate capacity.
Genesis Minerals’ (having recently acquired Dacian Gold) 2.8 tonnes per
year Mt Morgans Gold Operation remained in care and maintenancethroughout the quarter, having suspended operations in April. Production
also continued to be low over the quarter at Wiluna Mining Corporation’s
namesake project, which has been processing stockpiles since entering
care and maintenance in December 2022.
Australian gold mine production to reach a near-term peak in 2023–24
Australian gold production is forecast to rise marginally over the forecast
period, from 301 tonnes in 2022–23 to 302 tonnes in 2024–25. The impact

98

Production will continue to ramp up for recently commenced projects, suchas Pantoro’s Norseman project, Calidus’ Warrawoona Gold project andBellevue Gold’s namesake gold project.

Figure 10.7: Australian gold exploration expenditure and prices

Genesis Minerals’ 2.0 tonnes per year Ulysses project is underconstruction, with production expected to commence in early 2024.
Westgold’s 1.4 tonnes per year Great Fingall project is also expected toachieve first production early in 2024–25.
Northern Star Resources’ Super Pit (KCGM) gold operation is scheduled
to begin long-term expansion in 2024, growing to about 20 tonnes by2025–26. 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. Much weaker prices could see higher-cost
Australian producers cease or cut back their operations, or upcoming
projects be further delayed.
Gold exploration expenditure declined in the September quarter 2023
Australia’s gold exploration expenditure decreased by 12% year-on-year to$334 million in the September quarter 2023 (Figure 10.7).
As a result, gold’s share of Australian mineral exploration expenditure
declined to 29% in the September quarter 2023, down from 35% a year
earlier. This decline in exploration occurred despite high Australian gold
prices, which have historically motivated high exploration expenditure.
Western Australia remained the centre of gold exploration activity inAustralia, accounting for 72% of total gold exploration expenditure.
Revisions to the outlook

450

3,000

375

2,500

300

2,000

225

1,500

150

1,000

75

500

0
2009

2011 2013 2015 2017
Exploration expenditure

A$ a troy ounce

upside. Combining this with a slightly weaker than expected AUD/USD,
Australian dollar gold prices have been revised up over the outlook period.

A$ millionof significant new projects and mine expansions coming online will be
offset by mine closures and project delays.

02019 2021 2023
Australian gold price (rhs)

Source: ABS, Mineral and Petroleum Exploration (cat. no. 8412.0) (2023)

Australia’s forecast gold export earnings in 2023–24 have been revised up
by 12% compared with the September 2023 Resources and Energy
Quarterly. This reflects a strong September quarter 2023 result, alongside
upgrades made to forecast prices and a weaker assumed Australian
dollar. Forecast earnings have been revised up marginally in 2024–25 as
an upward revision in price forecasts is offset by downgrades to export
volumes.
Downgrades to production forecasts (underpinning lower forecast export
volumes) are the result of project commencements being delayed,following updated guidance from companies. Many of these updates arecovered in the 2023 Resources and Energy Major Projects report.

Forecast US dollar gold prices have been revised up across the board,due to persistent strength in prices and a rebalancing of risks towards the

Resources and Energy Quarterly | December 2023

99

Table 10.1: Gold outlook
Annual percentage change
World

Unit

2022

2023s

2024f

2025f

2023s

2024f

2025f

Total demandtonnes

4,699

4,500

4,445

4,460

-4.2

-1.2

0.3

Fabrication consumption b

tonnes

2,504

2,450

2,570

2,680

-2.1

4.9

4.3

Mine production

tonnes

3,625

3,691

3,765

3,776

1.8

2.0

0.3

– nominal

US$/oz

1,801

1,943

1,893

1,833

7.9

-2.6

-3.2

– real d

US$/oz

1,874

1,943

1,841

1,741

3.6

-5.2

-5.4

Australia

Unit

2021–222022–23

2023–24f

2024–25f

2022–23f

2023–24f

2024–25f

Mine production

tonnes

305

301

303

295

-1.3

0.7

-2.7

– volumetonnes

248

228

263

250

-7.7

15.2

-4.8

– nominal value

A$m

23,20024,406

26,531

21,275

5.2

8.7

-19.8

– real value e

A$m

25,92625,483

26,531

20,565

-1.7

4.1

-22.5

– nominal

A$/oz

2,529

2,721

2,942

2,642

7.6

8.1

-10.2

– real e

A$/oz

2,826

2,842

2,942

2,050

0.6

3.5

-30.3

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 | December 2023

100

Resources and Energy Quarterly | December 2023

101

Resources and Energy Quarterly | December 2023

102

11.1






Summary

The primary aluminium price has increased slightly from the September
quarter. The increase comes on the back of a new round of fiscal
stimulus from China, and power supply-related smelter production
curtailments in China’s Yunnan province.
Earnings for Australian exports of aluminium, alumina and bauxite are
expected to rise from $16 billion in 2023–24 to $18 billion in 2024–25,
as prices rise over the outlook period.
Russia’s share of world aluminium exports continues to fall as a resultof Western nations’ sanctions over the invasion of Ukraine.

11.2

World consumption

China led higher primary aluminium consumption in Q3 2023
Strong automotive sales in China helped drive up global primaryaluminium demand by 0.7% year-on-year in the September quarter 2023
to 17 million tonnes (Mt). Over this period, China’s passenger car salesrose by 3.4% year-on-year to nearly 6.9 million units. As a result, Chinese
primary aluminium demand increased by 4.4% year-on-year in the
September quarter 2023 to 11 million tonnes.
In the United States (US), the United Auto Workers strike — which
commenced on 15 September 2023 and ended on 30 October 2023 —disrupted US automotive production and reduced US primary aluminium
demand, which fell by 11% year-on-year in the September quarter 2023. In
Europe, sluggish construction activity continued to affect primaryaluminium demand. In the September quarter 2023, primary aluminium
demand in Europe fell by 10% year-on-year to 1.7 Mt.
Higher global primary aluminium production boosted the demand foralumina by 0.9% year-on-year to 34 Mt in the September quarter 2023.
Alumina demand in Canada rose by 3.3% year-on-year in the September
quarter 2023, as Canadian aluminium smelters lifted aluminium output.
Lower global alumina production reduced global bauxite usage by 1.3%
year-on-year in the September quarter 2023.

Resources and Energy Quarterly | December 2023

Energy-efficient cars to boost aluminium usage over the outlook
Strong global vehicle manufacturing activity is expected to offset weak
construction activity to lift global aluminium demand by 0.4% to 68 Mt in
2023. Automakers are seeking to reduce vehicle weight by substituting
aluminium for steel. Aluminium is 10-40% lighter than steel in comparable
components. Electric vehicle (EV) makers are focused on reducing vehicle
weight, since it impacts heavily on a vehicle’s driving range.
In China, the government is lifting support for the EV sector. In June 2023,
the government’s passenger electric vehicle (PEV) subsidy was extended
to 2025, then halving until 2027. This measure 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 H2 2024 and 2025, areexpected to boost global aluminium demand. In the US and Europe,
housing and commercial building activity are expected to recover wheninterest rates fall.
Rising EU imports of Chinese EVs may adversely impact European
primary aluminium demand. In the first seven months of 2023, Europe
imported US$13 billion of EVs from China compared to US$15 billion
during the whole of 2022.
Demand from automotive and construction market participants withdecarbonisation targets will boost demand for secondary aluminium
consumption over the outlook period, reaching 27 Mt by 2025.
An expected rise in global primary aluminium production is likely to drive
higher demand for alumina over the outlook period. World alumina
consumption is forecast to grow by 2.3% in 2024 and 1.3% in 2025, up
from 1.6% in 2023.

103

An expected fall in Australia’s alumina production is estimated to reduce
global bauxite consumption by 0.7% in 2023 to 357 million tonnes.
Australia is the world’s second largest alumina producer, accounting foraround 14% of global alumina production. Beyond 2023, an expected
improvement in Australia’s alumina refining operations will lift global
alumina output, and therefore, global bauxite consumption.

11.3

World production

Aluminium and bauxite output grew in Q3 2023
Faster than expected smelter restarts in China’s major aluminium
producing cities contributed to a 1.9% year-on-year rise in the global
primary aluminium output in the September quarter 2023. In Yunnan
Province (the 4th largest producing province), most aluminium smelters
have restarted after power restrictions in June 2023 suspended output.
A production ramp-up at Emirates Global Aluminium’s Al-Taweelah
boosted the United Arab Emirates’ primary aluminium output to 637,000
tonnes in the September quarter 2023, up 2.2% year-on-year.
Higher production at Rio Tinto’s 150,000 tonnes a year Kitimat aluminium
smelter boosted Canadian primary aluminium output to 829,000 tonnes in
the September quarter 2023, up 8.5% year-on-year.
Lower Chinese alumina output (down 3.0% year-on-year) drove a 2.3%
year-on-year fall in global alumina output in the September quarter 2023 tonearly 35 Mt. Offsetting the fall in Chinese alumina output is higher
alumina output in Jamaica and Brazil (up 137% and 4.1% year-on-year in
the September quarter 2023, respectively).
Higher output in Guinea — the world’s largest bauxite producer — drove
increased world bauxite production, which rose by 2.3% year-on-year in
the September quarter 2023 to nearly 96 Mt.
World aluminium, alumina and bauxite output rise over the outlook period
Production ramp-ups in China, India and Canada are expected to continue
to drive global primary aluminium output higher over the outlook period.

Resources and Energy Quarterly | December 2023

In China, primary aluminium output is forecast to rise from 41 Mt in 2023 tonearly 43 Mt in 2025. The forecast is about 600,000 tonnes less than theprevious forecast in the September 2023 Resources and Energy
Quarterly, due to the hydropower supply issue in Yunnan province.
Aluminium smelters in the province are required to curtail aluminium
capacity from November 2023 to May 2024. Wood Mackenzie has
estimated that around 600,000 tonnes of primary aluminium will be loss
from this curtailment.
Primary aluminium production in India is forecast to increase from 4.2 Mt in
2023 to 4.4 Mt in 2025. In Canada, primary aluminium production is
forecast to increase from 3.2 Mt in 2023 to 3.3 Mt in 2025, driven by thecontinued ramp-up of production at the Kitimat aluminium smelter.
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.
Lower production guidance for some Australian alumina refineries is
expected to see a reduction in global alumina output of 1.2% in 2023. In
the June quarter 2023, Rio Tinto revised its 2023 alumina guidance for its
Queensland Alumina Limited (QAL) refinery in Queensland down to 7.4 Mt
from 7.7 Mt. The downward revision reflects the company’s initiatives toimprove the QAL refinery’s operational stability. Alcoa indicated that its
Kwinana alumina refinery in Western Australia (WA) is mining lower gradebauxite. This suggests that lower alumina output from the Kwinana refinery
is likely.
Rising output from new/existing refineries in China and Indonesia is
expected to lift global alumina output over the outlook period. In China,
alumina production is expected to continue to rise, reaching nearly 84 Mt
in 2025. In Indonesia, the 2 million tonnes a year Mempawah alumina
refinery (a joint-venture between China Aluminium Company and someIndonesian entities), is expected to come online in 2024. It is expected thateight more alumina refineries will be built in Indonesia in the coming years,
with a total capacity addition of around 10 Mt.

104Trade sanctions imposed on Russia over its invasion of Ukraine in
February 2022 have forced Rusal to turn to China and India for alumina
supply. Russia consumes 7.7 Mt of alumina a year, of which 39% is fromdomestic production and 61% is imported. Ukraine, Australia and Ireland
were Russia’s three largest suppliers of alumina in 2022, together
accounting for 78% of Russia total alumina imports (Figure 11.1).

Figure 11.1: Russia’s alumina import sources
UkraineAustralia
Ireland
Kazakhstan

In October 2023, Rusal (Russia’s largest aluminium producer) announced
the acquisition of a 30% stake in a 4.8 Mt a year Hebei Wenfeng alumina
refinery in China. The deal is still waiting approval from China. If approved,
Rusal would be able to secure an alumina supply of 1.44 Mt a year.

A strong rise in bauxite production capacity in Guinea in the 2017 to 2022
period saw global bauxite yearly output rise by an average 6.6%. Over thesame period, global primary aluminium and alumina output grew on
average 2.8% and 3.7% a year, respectively (Figure 11.2).
Gains in China’s primary aluminium and alumina production drove strong
growth in global bauxite consumption in the 2017-22 period: global bauxite
consumption rose on average 3.3% a year. Over the same period, global
primary aluminium and alumina consumption grew on average 2.5% and2.5% a year, respectively (Figure 11.2).
Suriname is hoping to restart the bauxite operations that were stopped in2015. The Surinamese Government will award an operating licence inNovember 2024 to develop a bauxite mine in the jungle of western
Suriname has a proven bauxite reserve of 324 Mt, which will be used to
produce an average 3.7 MT of bauxite a year.

Resources and Energy Quarterly | December 2023

Jamaica
Brazil
ROW
0

10

20
%

30

40

Source: International Trade Centre (2022)

Figure 11.2: World aluminium, alumina and bauxite production andconsumption, average year-on-year growth 2017 to 2022
7
6
5
4
%

Rising production in Guinea is expected to offset the loss of Indonesianbauxite — due to an export ban which commenced on 10 June 2023 —and help drive global bauxite output up by 3.6% in 2023 to 400 Mt. Worldbauxite production is expected to grow by 3.8% in 2024 and 3.5% in 2025.
Guinea and Australia are expected to contribute most to this rise.

Guinea3
2
1
0
BauxiteAlumina
Production

Primary
aluminium

BauxiteAlumina

Primary
aluminium

Consumption

Source: Bloomberg (2023); World Bureau of Metal Statistics (2023); CRU (2023); Wood
Mackenzie (2023); Department of Industry, Science and Resources.

105

11.4

World trade

Weak primary and secondary aluminium and alumina exports in Q3 2023
Lower exports from Russia reduced global primary aluminium exports by
9.4% year-on-year in the September 2023 to nearly 3.2 Mt. Russia’s shareof global primary aluminium exports continued to drop, falling from 13% in
the September quarter 2022 to just 5.2% in the September quarter 2023.
Offsetting the fall in aluminium exports from Russia was higher exports
from Canada (up 14% year-on-year in the September quarter 2023) andAustralia (up 2.0% year-on-year in the September quarter 2023).
The slower than expected restart of idled primary aluminium capacity inEurope reduced world secondary aluminium exports in the September
quarter 2023. 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 2.4% year-on-year.
Lower alumina exports from Brazil — the world’s second largest alumina
exporter — cut global alumina exports by 7.7% year-on-year in the
September quarter 2023 to 9.5 Mt. Over this period, alumina exports from
China rose by 39% to 467,000 tonnes.
Higher bauxite exports from Guinea and Australia — the world’s twolargest bauxite exporters — boosted global bauxite exports by 7.2% yearon-year in the September quarter 2023. Over this period, Guinea exported
nearly 27 Mt of bauxite (up 21% year-on-year) and Australia exported 10
Mt of bauxite (up 14% year-on-year).
Lower aluminium and alumina imports, but higher bauxite imports
Weak primary aluminium consumption in Europe and the US reduced
global primary aluminium imports by 1.9% year-on-year in the September
quarter 2023. In the US, primary aluminium imports fell by 11% year-onyear in the September quarter 2023. Over this period, German and French
primary aluminium imports decreased by 11% and 2.9% year-on-year,
respectively.

Resources and Energy Quarterly | December 2023

Higher imports by China offset the fall in European and US imports. In the
September quarter 2023, China imported 489,000 tonnes of primaryaluminium, a rise of 178% year-on-year. Aluminium demand from theautomotive and solar energy sectors was the driving force behind China’s
increased imports.
China’s imports of Russian primary aluminium have increased significantly
so far in 2023; from 281,937 tonnes in the first nine months of 2022 to820,560 tonnes in the first nine months of 2023. On a monthly basis,
China’s primary aluminium imports from Russia reached a record high in
September 2023, at 159,642 tonnes.
On 1 November 2023, the US Government announced the continuation ofits suspension on import tariffs for European Union (EU) steel andaluminium pending further negotiations. In a move away from the previous
US Administration’s imposition of a 25% tariff on EU steel and 10% on EU
aluminium, the current US Administration initiated a tariff rate quota
system in January 2022 which permits 3.3 Mt of EU steel and 845,505
tonnes of EU aluminium to enter the US without tariffs.
Western aluminium consumers have continued to opt out of purchasing
Russian primary aluminium, which accounts for around 6.0% of the world’s
primary aluminium output. In October 2023, Novelis Europe — asubsidiary of the world’s leading rolled aluminium products maker, Novelis
announced it will exclude Russian aluminium from its 2024 supply tender.
Lower European imports reduced global secondary aluminium imports by
1.5% year-on-year in the September quarter 2023. Many European
nations reduced secondary aluminium consumption in response to slowing
construction activity. In Spain, secondary aluminium imports in the
September quarter 2023 fell by 46% year-on-year to 7,000 tonnes. Over
this period, Germany’s secondary aluminium imports fell by 6.7% year-onyear to 112,000 tonnes.
Higher alumina production in India reduced global alumina imports by
8.2% year-on-year in the September quarter 2023. Over this period, India
imported 578,000 tonnes of alumina (down by 6.2% year-on-year).

106

Russia’s alumina import data is not available and is not included in thisassessment.

11.5

Higher bauxite imports from China increased global bauxite imports by
7.4% year-on-year in the September quarter 2023. Over this period, China
imported 35 Mt of bauxite (up 17% year-on-year).

The prospect of a new round of fiscal stimulus from China and power
supply-related smelter production curtailments in China’s Yunnan Province
in the upcoming dry season have recently boosted the London Metal
Exchange (LME) aluminium price. The LME primary aluminium spot priceis likely to average around US$2,250 a tonne in the December quarter
2023, up from US$2,154 a tonne in the September quarter 2023.
Aluminium is estimated to average US$2,260 a tonne in 2023, down by
16% from 2022 (Figure 11.3).

Green aluminium, alumina and bauxite
The push to lower the industry’s carbon footprint continues in all stages ofthe sector, both in Australia and offshore.
In 2022, 37% of the electricity consumed at Portland Aluminium smelter inVictoria was derived from renewable sources, including electricity fromnearby wind farms.
South32’s Worsley Alumina refinery in Western Australia successfullytransitioned the first of its coal-fired boilers to natural gas in October 2023.
This transformation is expected to cut operational greenhouse gas
emissions at Worsley Alumina by up to 208,000 tonnes a year of carbon
dioxide equivalent. The company is planning to convert a second coal-fired
boiler to natural gas at Worsley Alumina in 2024.
In cooperation with Vedanta Aluminium, the Indian Institute of Technology
has developed an innovative bauxite refining process to reduce thegeneration of bauxite residue (known as red mud) by 30%. The process
eliminates the iron content at the same time as a higher alumina yield isrecovered. The enhances resource efficiency and reduces energy
consumption during refining, thereby reducing the carbon footprint in theprocess.
Rio Tinto Canada is partnering with the Montreal Canadiens to introduce
recyclable aluminium cups at the Bell Sporting Centre in Quebec, Canada.
The new aluminium cups are produced from low-carbon aluminium andexpected to replace 1.5 million plastic cups annually — with around 24
tonnes of plastic removed from the environment.

Resources and Energy Quarterly | December 2023

PricesLME aluminium price has rallied from its September quarter average

LME stock changes reflect a recovery in ex-China primary aluminium
demand in recent months, falling from 515,750 tonnes in August 2023 to449,525 in December 2023. Shanghai Future Exchange aluminium stocks
rose from 79,194 tonnes in September 2023 to 111,869 tonnes in
December 2023, reflecting higher supply from Yunnan. LME off-warrant
stocks followed the same trend, rising from 207,056 tonnes in May 2023 to
330,966 tonnes in October 2023 (Figure 11.4).
In line with the fall in the primary aluminium price, the free on board (FOB)
Australian alumina price is estimated to fall by 5.3% to an average
US$345 a tonne in 2023 (Figure 11.3).
Primary aluminium and alumina prices to rise in 2024 and 2025
Growing global demand for new and energy-efficient cars andtechnologies is expected to provide support to aluminium usage and prices
over the outlook period. The LME spot price for aluminium is forecast to
rise at an average annual rate of 2.9% in 2024 and 2025, reaching about
US$2,400 a tonne by 2025.
Like aluminium, the FOB Australian alumina price is forecast to rise in
2024 and 2025, averaging about US$350 a tonne in 2025. Stronger
alumina supply from China is expected to be offset by higher alumina
demand from China and ex-China’ aluminium smelters.

107

An influx of Russian primary aluminium into the LME warehouses is likely
to distort the LME primary aluminium prices. Figure 11.5 shows the LME
on-warrant primary aluminium stocks, which were first released in
February 2023. Russia’s share of the LME on-warrant stock has risen from
41% in January 2023 to nearly 80% in October 2023. As more and moreconsumers opt not to purchase Russian primary aluminium, a further
increase of Russian aluminium in the LME stocks is expected.

Figure 11.4: Exchange aluminium stocks
6
Million tonnes

Chinese aluminium producers’ expansion into southeast Asia is expected
to impact global aluminium supply over the coming years. The nearer
China’s domestic capacity comes to its 45 Mt a year limit, the more likely
Chinese aluminium smelters will build up their operations overseas.
Notable development includes the construction of 1 Mt a year Shandong
Nanshan aluminium smelter in Indonesia by the end of 2023.

5
4
3
2
1
0
Dec-13Figure 11.3: Primary aluminium and alumina prices
3,000

500

Dec-15
Dec-17
LME aluminium stocks
LME off-warrant stocks

Dec-23
Dec-19Dec-21
Shanghai aluminium stocks

440

2,200

380

1,800

320

1,400

260

1,000

200

Figure 11.5: LME on-warrant primary aluminium stocks, monthly
90
80
70
60
%

2,600

US$ a tonne

US$ a tonne

Source: London Metal Exchange (2023); Bloomberg (2023)

50
40
30

2015

2017

2019

2021

2023

2025

Average LME aluminium price
Average FOB Australia alumina price (rhs)
Source: Bloomberg (2023); Department of Industry, Science and Resources (2023)

20
100
Jan-23
RussiaMar-23May-23

India (non-Russian)Jul-23

Sep-23

Other non-Russian*Notes: Non-Russian includes Australia, Bahrain, Canada, India, Indonesia, Iran, Malaysia,
Oman, Saudi Arabia, South Africa, the UAE and the US.
Source: London Metal Exchange (2023)

Resources and Energy Quarterly | December 2023

108

11.6

Australia’s exports and production

Strong bauxite exports drove export earnings in September quarter 2023
Higher bauxite export volumes and values boosted Australia’s aluminium,
alumina and bauxite (AAB) exports up by 2.1% year-on-year in the
September quarter 2023 to $4.0 billion.
A ban on bauxite exports by Indonesia — which started on 10 June 2023
— seems to have assisted Australian bauxite exporters. Provisional trade
data for the September quarter 2023 shows a 66% year-on-year rise inAustralian bauxite export values to China, to 450 million. In the September
quarter 2023, Australian bauxite exports reached 10 Mt a quarter for the
first time since the September quarter 2020 (Figure 11.6).

25% year-on-year to $252 million and $50 million, respectively. Largely
offsetting the fall in exports to Japan and the US was a 53% year-on-year
rise in exports to South Korea to $402 million.
A 4.0% year-on-year fall in alumina export volumes reduced Australianalumina export values by 0.9% year-on-year to $2.1 billion in the
September quarter 2023.
Higher alumina, aluminium and bauxite export earnings in prospect
An expected rise in alumina and bauxite export volumes and values arelikely to boost Australian AAB export earnings from $16 billion in 2023–24
to $18 billion in 2024–25 (Figure 11.7).
Figure 11.7: Australian aluminium/alumina/bauxite exports

Figure 11.6: Australia’s bauxite export volumes, quarterly

18

12
16
14

8

$ billion

Million tonnes

10

6

12
10
8

4

6

2

4

0
Sep-212
Mar-22
China

Sep-22South Korea

Mar-23US

Sep-23

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

An 8.5% year-on-year fall in the LME aluminium price in the September
quarter 2023 reduced Australian primary aluminium export values by 6.4%
year-on-year to $1.2 billion in the September quarter 2023. Over thisperiod, primary aluminium exports to Japan and the US fell by 33% andResources and Energy Quarterly | December 20230
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 Resources109

Improved operating conditions at Rio Tinto’s Queensland Alumina Limited
and Yarwun alumina refineries in Queensland lifted Australian alumina
output to nearly 5.0 Mt in the September quarter 2023, up 4.2% year-onyear.
Improved weather conditions in Queensland helped drive Australianbauxite output up by 4.9% year-on-year in the September quarter 2023 tonearly 27 Mt.
Higher aluminium/alumina/bauxite output expected over the outlook period
With Portland Aluminium’s production cut expected to finish by the end of2023, Australian primary aluminium output should be back close to normal
over the outlook period, at about 1.6 Mt of primary aluminium a year
(Figure 11.8).

FYI Resources received a $1.2 million research and development tax
incentive rebate from the Australian Government in November 2023 for its
HPA project in WA. FYI has developed an innovative process design for
the integrated production of high quality HPA.
Figure 11.8: Australian aluminium/alumina/bauxite output
120

1.8

100

1.5

80

1.2

60

0.9

40

0.6

20

0.3
0.0

0

Australia’s alumina output is expected to fluctuate around the 20 Mt a year
level over the outlook period. At the time of writing, Alcoa is still waiting for
approval from the Western Australian Government for its MineManagement Program — usually approved on a 5-year basis (Figure11.8).
The expansion of Metro Mining’s Bauxite Hills mine 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 nearly 110 Mt in 2024–25 (Figure 11.8).
In November 2023, Impact Minerals released a scoping study for its
10,000 tonnes a year Lake Hope high purity alumina (HPA) project inWestern Australia. The study suggests Lake Hope could possibly deliver

Resources and Energy Quarterly | December 2023

Million tonnes

Higher output from the Boyne Island aluminium smelter in Queensland
helped lift Australian primary aluminium output by 0.9% year-on-year in the
September quarter 2023. In mid-March 2023, amid operational instability,
Alcoa announced an immediate 25% production cut at Portland Aluminium
in Victoria.

the lowest cost HPA anywhere in the world. A preliminary feasibility study
is due for completion in 2024.

Million tonnes

Australia’s aluminium/alumina/bauxite production rose in Q3 2023

2014–15 2016–17 2018–19 2020–21 2022–23 2024–25
Alumina

BauxiteAluminium (rhs)

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

Revisions to the outlook
The forecasts for Australia’s AAB export earnings in 2023–24 and 2024–
25 have been revised up from the September 2023 REQ — by $129
million and $260 million, respectively. The revision reflects forecasts for alower-than-expected AUD/USD over the outlook period.

110

Russia has diversified its primary aluminium export markets from the Westto China. Russia’s share of China’s total primary aluminium imports has
risen from 5.8% in the December quarter 2021 (one quarter before theinvasion) to 83% in the September quarter 2023 (six quarters after theinvasion).
Russia has shipped its unsold primary aluminium stocks into the LME
aluminium warehouses. Russia’s share of the LME on-warrant stocks has
risen from 53% in the March quarter 2023 to 76% in the September
quarter 2023.

Resources and Energy Quarterly | December 2023

8

40

6

30

4

20

2

10

0

0

Before the invasion
Aluminium production
Bauxite production
Alumina imports*
LME on-warrant stocks (rhs)%50

Sep-2310

Jun-2360

Mar-2312

Dec-2270

Sep-22

14

Jun-2280

Mar-2216

Dec-2190

Sep-21

18

Jun-21

Despite there being no direct sanctions on Russian aluminium by Western
nations, Russia’s share of world primary aluminium exports has fallenfrom 18% in the December quarter 2020 (five quarters before theinvasion) to 5.2% in the September quarter 2023 (six quarters after theinvasion) (Figure 11.9). Western aluminium consumers have opted not to
buy Russian aluminium to avoid being caught up in the fallout from any
new sanctions.

100

Mar-21

Russia’s AAB production is little changed from pre-invasion levels, as is its
share of global AAB output (Figure 11.9). After February 2022, Russia lost
two crucial sources of alumina supply, as Ukraine suspended production
and Australia banned alumina and bauxite supply to Russia. To offset forthis lost, Russia has stepped up imports of alumina from China, andrecently India.

20

Dec-20After Russia invaded Ukraine in February 2022, Australia, the UnitedStates, Canada, the European Union and other Western countries
imposed sanctions on Russian exports of a number of commodities,
including alumina and bauxite. This analysis presents the impacts ofinternational sanctions on Russia’s primary aluminium, alumina andbauxite (AAB) production and trade.

Figure 11.9: Russia’s shares of global aluminium/alumina/bauxite
production, consumption, exports and imports%

Box 11.1: Russia’s aluminium/alumina/bauxite production and trade

After the invasion
Alumina production
Aluminium exports
China's aluminium imports (rhs)

Notes: *June quarter 2022 to September quarter 2023 data is not available.
Source: China Customs (2023); London Metal Exchange (2023); World Bureau of Metal
Statistics (2023); Department of Industry, Science and Resources (2023)
Source: China Customs; London Metal Exchange; World Bureau of Metal Statistics; Reuters,
Analysis: To cut reliance on China, Russia turns to India for aluminium feedstocks, 15
September 2023; Department of Industry, Science and Resources.

111

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

68,52968,05069,93568,35471,556
72,23872,51673,385

2.1
0.4

2.3
5.7

1.3
1.6

US$/t
US$/t

2,708
2,818

2,264
2,264

2,332
2,269

2,397
2,277

-16.4
-19.7

3.0
0.2

2.8
0.4

US$/t
US$/t
Unit

365
379
2021–22345
345
2022–23

346
336
2023–24 f

346
329
2024–25 f

-5.3
-9.0
2022–23

0.1-2.6
2023–24 f

0.1-2.2
2024–25 f

kt
kt
Mt

1,525
20,114102.3

1,532
18,97198.5

1,579
19,795107.0

1,587
20,446
109.4

0.5
-5.7
-3.7

3.1
4.3
8.6

0.5
3.3
2.2

kt

240

151

204

191

-37.1

35.0

-6.5

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

1,368
5,710
6,380
17,7398,977
10,03235,957
1,177
1,315

1,440
5,282
5,515
16,566
8,308
8,674
34,113
1,284
1,340

1,429
4,949
4,949
17,094
8,862
8,862
38,252
1,428
1,428

1,444
4,905
4,741
17,7889,040
8,738
38,325
1,366
1,320

5.3
-7.5
-13.6
-6.6
-7.5
-13.5
-5.1
9.1
1.9

-0.7
-6.3
-10.3
3.2
6.7
2.2
12.1
11.3
6.6

1.0
-0.9
-4.2
4.1
2.0
-1.4
0.2
-4.4
-7.6

A$m
A$m

16,854
18,83416,006
16,712

16,48916,48917,562
16,976

-5.0
-11.3

3.0
-1.3

6.5
3.0

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 | December 2023

112

Resources and Energy Quarterly | December 2023

113

Resources and Energy Quarterly | December 2023

114

12.2

World consumption

World copper demand growth robust so far in 2023, all due to China
Global refined copper consumption was 8.4% higher (year-on-year) in thefirst nine months of 2023, reaching 20.7 million tonnes (Figure 12.2). This
growth was primarily driven by China (up 12% over the period) and Rest of
Asia, helping to offset an almost 12% fall in US consumption.
Despite ongoing challenges faced in its residential property sector, China’s
demand for copper has remained incredibly strong so far in 2023. A key
driver has been the country’s infrastructure sector, which has maintained
high growth this year. This includes the country’s clean energy industry,
with the central government continuing to make large investments inenergy infrastructure (particularly renewable energy) in 2023. China isestimated to have added around 150GW of additional solar and wind
power generation capacity so far this year, equating to around 650,000
tonnes of copper demand (equivalent to 5% of the country’s total copper
demand over the same period).
China’s electric vehicle (EV) manufacturing sector has also seen further
growth in 2023, with pure EV passenger vehicle production in the year-toSeptember rising 11% year-on-year.
Resources and Energy Quarterly | December 2023

66

60

62

40

58

20

54

0

50

-20

46

-40

42

PMI reading

80

38
2023
US building permits
World manufacturing PMI (RHS)

-60
2021
2022
China property starts
Eurozone construction PMI (RHS)
China manufacturing PMI (RHS)
Source: Bloomberg (2023)

Figure 12.1: Refined copper consumption
25

30%

20

20%

15

10%

10

0%

5

-10%

0

World

China

Rest of
Asia

First nine months of 2023

EuropeUS

Rest of
world

-20%

Annual percentage change Copper prices have trended lower in H2 2023. Despite strong growth incopper demand in China in 2023, the poor near term outlook forconstruction and manufacturing in major markets such as Europe andAdvanced Asia continues to weigh on the copper price.
 The benchmark LME copper is estimated to average about US$8,200 atonne in H2 2023 (down from US$8,700 a tonne in H1).
 Global copper consumption is estimated to grow by 7.3% in 2023. China
is expected to account for the bulk of this growth, driven by increased
manufacturing activity and large investments in energy infrastructure.
 Australian copper export earnings are forecast to reach around$12.8 billion in 2023–24. Higher Australian production and export
volumes will see export earnings reach $13.4 billion in 2024–25.

Figure 12.1: Leading global indicators for copper

Annual percentage change

Summary

Million tonnes

12.1

Year-on-year growth (RHS)

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

115

With pure EVs (also known as battery EVs) requiring close to four times asmuch copper as conventional internal combustion engine vehicles, EV
production is expected to become a growing source of domestic demandfor copper in China over the next few years.

Figure 12.3: World copper consumption in 2022, by end use

These industries have helped to offset continued weakness in the
country’s property sector (Figure 12.1), which has seen further falls (yearon-year) in new construction starts in H2 2023 (see Macroeconomic
Outlook and Steel chapters).
Weaker outlook for world (ex. China) manufacturing, and construction
A slowing global economy through 2023 has seen dampened
manufacturing activity amongst other major economies. Industrial
production fell in August in both the Eurozone and Advanced Asia regions,while US output has been flat (year-on-year) through much of 2023.
Manufacturing PMIs in October point to a further contraction for key
producers such as Europe, US and Japan heading into 2024 (Figure 12.1).
Global construction activity — which accounted for about 25% of world
copper demand in 2022 — has helped to mitigate ongoing weakness inworld manufacturing (ex China). By sector, infrastructure continues todrive activity, while tighter financial conditions have discouraged activity inthe residential and commercial sectors. By region, the Middle East &Africa, and the Americas continue to see the strongest activity, though
growth appears to be slowing in North America. Europe continues to see a
noticeable deterioration in both activity and year-ahead expectations, while
the outlook for the Asia region remains mixed, with a positive view for India
and Philippines offsetting weaker expectations for China.
European manufacturing and construction facing continued challenges
European copper consumption in the nine months to September 2023 was
0.2% lower year-on-year. This follows continued frailty in the region’s
manufacturing sector, with industrial output in the Eurozone (year-on-year)
in September, and the manufacturing PMI in October at a historicallyweak level. S&P’s Global Copper Users survey for October showed thesteepest decline in production in the region since May 2020.

Resources and Energy Quarterly | December 2023

Notes: Uses categories from the Copper Alliance Global Semis End Use data; Consumer
and general products inc. appliances, instruments and tools, cooling equipment, electronics
and other diverse products; Building construction inc. plumbing, telecommunications, airconditioning, electrical power; Infrastructure inc. power utility and telecommunications;
Transport inc. automotive, EV batteries and other transport; Industrial inc. transformers andmotors, non-electrical fittings and plant.
Source: International Copper Study Group (2023)

Despite an ambitious medium-term outlook for the region associated with
its NextGenerationEU plan, the European construction sector faces further
near-term challenges. The Eurozone construction PMI in October marked
its fastest decline in 10 months, while further falls in new orders points topessimism for the sector heading into 2024.
US manufacturing faces near term challenge, but strong long-term outlook
The US manufacturing PMI returned to a neutral reading in October, after
several months of contractionary expectations through the second half of2023. Rising input costs continue to be a concern for producers, withgrowth in the country’s industrial output remaining flat (year-on- year)
through the second half of the year. Despite the near-term challenges,
new investment — encouraged by the Inflation Reduction Act — isexpected to drive stronger growth in US manufacturing activity over the
medium term. This will include a particular concentration of projects in theclean energy sector, with market estimates of as much as $280 billion in
new investments in the sector since the passing of the Act.

116

Figure 12.4: Mined copper production
20%

15

15%

Million tonnes

18

10%

9

5%

6

0%

3

-5%

0

World

Chile

Peru

DRC

First nine months of 2023

China Indonesia Rest ofworld

Growth12-10%Year-on-year growth (RHS)

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

After strong growth in 2023, global copper demand is expected to grow by
0.3% per annum to 2025. World demand will be supported by 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.

12.3World production

Global mined copper output expected to grow modestly in 2023
Global mined copper production grew 2.9% (year-on-year) in the ninemonths to September 2023, to reach 16.5 million tonnes. Amongst major
producers, there were falls in output for Chile, and flat growth for China
and Indonesia over the period (Figure 12.4).
World mine production has been affected by a number of concurrent
issues so far in 2023, including adverse weather, equipment failure,community action, slower than expected ramp-up of projects, and lower
grades from many existing operations.
Resources and Energy Quarterly | December 2023

Codelco — the world’s largest copper miner in 2022 — has continued to
struggle with operational issues and high debt through 2023. Thisculminated in the company recently cutting production guidance for 2023
by around 5%. In an effort to safeguard margins, the company recently
announced an aim to remove floating premiums in its 2024 contracts andrevert to a fixed rate of around US$90 a tonne, down 36% from this year’srate. The company is reported to be exploring replacing its current longterm copper concentrates export contracts with higher value-add products
such as blister and anodes.
The fall in output from Chile’s (and the world’s) largest miner was partially
offset by 8% higher (year-on-year) production from the BHP joint venture,
Escondida, in the September quarter 2023. Escondida also reported thesuccessful completion of negotiations for a new collective agreement with
its supervisor’s union.
Peru saw strong growth for the first nine months of 2023, rising 16% yearon-year. This included higher production from Peru’s newest major coppermine, Quellaveco — a joint venture between Anglo American and
Mitsubishi — with the operation contributing to a 42% increase in quarterly
production for Anglo American in the September quarter 2023.
Mined copper to grow by around 2.8% annually to 2025
Mined copper production is expected to grow close to 1.9 million tonnes
over the next two years, with the majority of the increase coming from
Chile, the Democratic Republic of Congo and Russia.
Chile is expected to add around 500,000 tonnes of mined capacity over
the outlook period. This will include ramp up of Teck Resources’ Quebrada
Blanca Phase 2 operation, which reached a 70% run rate at the end of theSeptember quarter. The company expects to be operating at full capacity(300,000 tonnes per annum) by the start of 2024.
The Democratic Republic of the Congo is expected to add around
450,000 tonnes in new capacity over the outlook period. This expansion
reflects significant Chinese investment in many of the country’s copper
projects, including the 650,000 tonnes per annum Kamoa-Kakula project117

Russia is also expected to see two significant copper projects
commissioned over the outlook period, with a potential capacity of morethan 400,000 tonnes of production per year. This includes the Malmyzh
gold-copper project in Far East Russia, and Russia’s largest copper mine
Udokan in Eastern Siberia.
China and DRC leading global refined copper production in 2023
Refined copper production grew 7.3% year-on-year for the first ninemonths of 2023, to reach around 20.4 million tonnes (Figure 12.5). This
included significant growth in the Democratic Republic of Congo andChina — the world’s largest producer with almost half of the world’s
refined output — over the period. These gains helped to offset falls
amongst other major producers such as Europe and Chile.
Domestic refiners in China significantly boosted production in the first ninemonths of 2023, growing 18% year-on-year. While low inventories andstronger refining charges contributed to this increase, the rise wasconcurrent with a significant fall in China’s imports of refined copper overthe same period. Rising domestic output in part reflects China’s usual
seasonal ramp up in inventories to meet the typical construction peak
period in September and October.
However, despite the strong rise in Chinese copper output, copper
inventories in China (as well as other exchanges) remain at historic lows,
and this represents an ongoing upside risk to prices over the outlook
period (Figure 12.6).
China, Indonesia and India to drive expansion in refined output to 2025
Global refined copper production in 2023 is estimated at around 27.7
million tonnes in 2023 and grow by around 0.7% annually through to 2025.
This is expected to be led by new capacity in China, Indonesia and India.

Resources and Energy Quarterly | December 2023

Figure 12.5: Refined copper production

Million tonnes(joint owned by Zijin Mining Group), the Deziwa mine (joint owned by
China Nonferrous Metal Mining Company), and China Molybdenum
Company’s Kisanfu project.

25

20%

20

15%

15

10%

10

5%

5

0%

0

World

China

EuropeFirst nine months of 2023

Chile

DRC

Rest ofworld
Year-on-year growth (RHS)-5%

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

China is expected to see more than 1 million tonnes of refining capacity
added in the next few years, equivalent to close to 10% of its total
production in 2022. This will include a 275,000 tonne expansion ofGuangxi’s Nanko refinery, and three projects owned by Tongling
Nonferrous — and all slated for completion by 2025.
Indonesia is expected to drastically increase copper refining output in thenext couple of years, 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.
India is also expected to see strong growth in refined copper output overthe next few years. This includes Adani Group’s Gujarat refinery, expected
to be operational in early 2024 — with an initial capacity of 500,000 tonnes
per year, and an eventual annual nameplate capacity of 1 million tonnes.

118

Figure 12.6: Global copper inventories

12.4

Global macro headwinds continuing to weigh on prices heading into 2024

1,400

From a peak of US$8,900 a tonne in March, copper prices have continued
to trend lower in recent months, averaging US$8,190 a tonne in
November. The fall comes despite solid growth in China’s refined copper
demand through 2023, a consequence of the poorer outlook forconstruction and manufacturing in other key markets, such as Europe andex-China Asia.

Thousand tonnes

1,200
1,000
800
600
400
200
0
2018
World inventory

2019

2020

2021

Inventory at major exchanges

2022

2023

Refined copper stocks in China

Source: Bloomberg (2023)

Figure 12.7: Copper price

10,000

US$ a tonne

The weak global outlook (ex China) is expected to put downward pressure
on copper prices in the near term. Lead indicators suggest further nearterm vulnerability in global manufacturing, and in construction activity in
key markets such as Europe. China is also expected to face continued
challenges in its construction sector in coming months, though this will be
offset by robust activity in its manufacturing and energy infrastructure
sectors. Compared to an estimated average of around US$8,200 a tonnein H2 2023, the price is expected to average around $8,100 a tonne in
2024 and rise to $8,500 a tonne in 2025 (Figure 12.7).
Upside risks to prices include the historically low levels of inventories
globally (Figure 12.6). Stronger-than-expected demand in coming quarters
could be expected to draw inventories further and possibly cause pricespikes. Continued expansion of clean energy manufacturing in economies
such as China and the US also present upside risks to copper prices over
the outlook, with significant public and private investment in manufacturing
capacity and infrastructure in both countries in recent years.

12,000

8,000
6,000

12.5

Australia

Falling copper price to offset stronger export volumes to 2024–25

4,000

Exports are forecast to be around $12.8 billion in 2023–24, a 4.2% rise
year-on-year (Figure 12.8). Moderating prices through late 2023 andprojected for 2024 are expected to be offset by stronger export volumes
forecast, for both mined and refined copper products.

2,000
0
2016

Prices

2017

2019

2020

Source: LME (2023) official cash price, refined

Resources and Energy Quarterly | December 2023

2022

2023

2025

In 2024–25, continued growth in export volumes and stronger prices are
expected to contribute to export earnings of around $13.4 million.

119

Mined production is expected to grow over the outlook period to reacharound 868,000 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 greenfield andbrownfield mid-tier producers.
The rise in Australian mined production will come despite the closure of
Glencore’s Mount Isa copper mines and concentrator in 2025. Despite themine closure, the company’s copper smelter in Mount Isa and refinery inTownsville are expected to continue operating to 2030, subject to approvalof additional capital investment.
Australia’s refined copper production is also expected to grow by around
1.8% annually to 2024–25, to reach around 471,000 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
Copper exploration expenditure rose to $183 million in the September
quarter 2023. This was around 10% higher than the comparable quarter in
2022, and continues a general upward trend seen since 2017.

Resources and Energy Quarterly | December 2023

1,200

16

900

12

600

8

300

4

0

2018–192020–212022–23

VolumesValues (rhs)2024–25

A$ billion

Mined production in the September quarter 2023 was 4.2% lower year-onyear. This follows a 6.4% fall in output from BHP’s Copper South Australia
over the period, a consequence of planned maintenance undertaken
during the September quarter.

Figure 12.8: Australia’s copper export volumes and values
Metal content, thousand tonnes

Mine production sees healthy growth over the outlook period0

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

Revisions to the outlook
Compared to the September Resources and Energy Quarterly, theforecast for Australia’s copper export earnings in 2023–24 are littlechanged over the outlook period offset by stronger export volumes.
Forecast earnings in 2024–25 have been revised up by $0.7 billion due tostronger export volumes (particularly new ores and concentrates
products).

120

Table 12.1: Copper outlook
Annual percentage change
World

Unit

2022

2023s

2024f

2025f

2023s

2024f

2025f

– minekt

21,58622,33323,56524,248

3.5

5.5

2.9

– refined

kt

25,786

27,58528,07328,213

7.0

1.8

0.5

Consumption

kt

25,842

27,72927,932

28,347

7.3

0.7

1.5

Closing stocks

kt

942

644

526

655

-31.7

-18.3

24.7

1.9

1.3

1.0

1.2

-33.6

-20.2

21.4

US$/t

8,815

8,469

8,072

8,509

-3.9

-4.7

5.4

USc/lb

400

384

366

386

-3.9

-4.7

5.4

US$/t

9,174

8,469

7,852

8,083

-7.7

-7.3

2.9

USc/lb

416

384

356

367

-7.7

-7.3

2.9

Australia

Unit

2021–222022–23f

2023–24f

2024–25s

2022–23f

2023–24

2024–25f

Mine output

kt

781

808

813

868

3.5

0.6

6.8

Refined output

kt

368

454

469

471

23

3.3

0.5

– ores and concsc

kt

1,641

1,521

1,491

1,680

-7.3

-2.0

13

– refined

kt

330

415

454

471

26

9.4

3.8

– total metallic content

kt

808

854

882

951

5.7

3.3

7.8

– nominal

A$m

12,12812,271

12,792

13,416

1.2

4.2

4.9

– realA$m

13,553

12,813

12,792

12,969

-5.5

-0.2

1.4

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; s estimate
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 | December 2023

121

Resources and Energy Quarterly | December 2023

122

13.1

Summary Chinese demand (from end-uses such as stainless steel and EV battery
production) continues to drive global nickel consumption, now forecast
to rise by 5.5% year-on-year in 2023 and by 7.4% annually to 2025.
 A continuing oversupply in the global nickel market — driven by strong
growth in Indonesian and Chinese supply — is expected to peak in 2023,
though will remain over the outlook period.

This trend is being driven by the Chinese market. With electric vehicle
batteries making up about a third of the cost of an EV, Chinese consumers
have shown a strong preference for lower-cost EVs, favouring LFPchemistries. For example, in 2022, almost 95% of LFP batteries produced
globally for light duty vehicles were used to produce vehicles in China.
Demand for non-nickel batteries such as LFP grew in 2023, but short-term
growth has been revised down due to softer-than-expected EV sales.
EV-related nickel demand is expected to be the main driver of nickel
consumption from 2025 onwards, with nickel demand growth expected toremain the strongest out of the base metals.

13.2

Figure 13.1: World nickel consumption

World consumption

Global refined nickel consumption continues to strengthen, with 5.8%
year-on-year growth in the year to September (Figure 13.1). While mostmajor markets have seen declining demand this year, China usage has
seen a significant rebound, rising 16% year-on-year over the period.
Global stainless steel output — which represented around 70% of refined
nickel demand in 2021 — continues to be a significant driver of growth inChinese nickel demand. In the September quarter 2023, China has seen a
28% year-on-year increase in stainless steel production, with output
expanding due to increased infrastructure spending by China’s central
government in recent years (see Steel chapter).
Electric vehicle demand to continue to drive nickel consumption to 2025
Despite growing global macroeconomic uncertainty, electric vehicle
demand has continued to grow through 2023, with world sales of fullelectric vehicles rising close to 40% in the year to August. Nickel
chemistries continue to dominate the global battery market with nickelmanganese-cobalt (NMC) and nickel-cobalt-aluminium (NCA) accounting
for close to 75% of market EV sales over the same period. However, nonnickel lithium battery chemistries have remained on the rise in 2023, withlithium-iron-phosphate (LFP) accounting for 25% of the market andgrowing more than 50% year-on-year over in the year to August.
Resources and Energy Quarterly | December 2023

Million tonnes

World nickel demand continues to expand in 2023 due to China

2.5

30%

2.0

20%

1.5

10%

1.0

0%

0.5

-10%

0.0

World

China

IDN

EU

First nine months of 2023

Japan

US

ROW

Annual percentage growth Weaker prices over the outlook period are expected to push Australiannickel export earnings lower, falling from $5.0 billion in 2022–23 to$3.9 billion in 2023–24, before recovering to $4.3 billion in 2024–25.

-20%

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 usage is estimated to grow to 3.1 million tonnes in2023 — an increase of 5.5% year-on-year. Global refined nickel
consumption is forecast to grow to 3.6 million tonnes by 2025. This growthis expected to be driven by continued growth in global stainless steel
output and nickel-intensive battery demand from rising EV sales.

123Figure 13.2: World mined nickel production

Global mined nickel production is expected to rise by 16% year-on-year toreach 3.7 million tonnes in 2023, as Indonesia continues to drasticallyincrease global supply, as well as a ramp-up in production for several
other key regions.
World mined nickel production is forecast to reach 4.1 million tonnes by2025. Indonesian output is expected to continue to expand, from 2 million
tonnes in 2023 to 2.5 million tonnes in 2025, representing 56% of global
supply. However, with the Indonesian government enforcing a slow-downof 2023 mining permits — and planning on stricter permitting (in terms of
ESG and other requirements) from 2024 — there are downside risks togrowth in global production over the outlook period.

Million tonnes

Indonesia leads global nickel output through 2023

3.0

35%

2.5

25%

2.0

15%

1.5

5%

1.0

-5%

0.5

-15%

0.0

Growth of Indonesian nickel pig iron (NPI) is expected to slow in coming
months as large stockpiles built through 2022 and 2023 are drawn down.
Indonesia has also announced that some NPI furnaces will be converted
to produce nickel matte. This is in addition to new nickel matte furnace
capacity that will be used to meet demand for batteries and class 1 nickel.
Global refined production to grow 5.6% annually to 2025
Global refined nickel output is forecast to rise to 3.7 million tonnes in 2025.
China and Indonesia are expected to continue to dominate refined nickel
production, with each expected to increase capacity by approximately
300,000 tonnes by 2025.

Resources and Energy Quarterly | December 2023

PH

NC

RUS

AUS

ROW

-25%

Year-on-year growth (RHS)

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

Figure 13.3: World refined nickel production

Million tonnes

The main source of global supply growth is Indonesia, with future growth
focused on nickel matte and mixed hydroxide precipitate (MHP) production
to feed battery and class 1 nickel supply chains. High-pressure acid leach(HPAL) plants are expected to drive production of MHP from 2024 on.

IDNFirst nine months of 2023

Shifting supply of battery grade nickel
Chinese production and consumption of battery grade material was
weaker than expected. This was due to supply chain destocking caused byfalling nickel prices.

World

Annual percentage growth

World production

3.0

35%

2.5

25%

2.0

15%

1.5

5%

1.0

-5%

0.5

-15%

0.0

World

Indonesia

China

First nine months of 2023

EU

RussiaROW

Annual percentage growth

13.3

-25%

Year-on-year growth (RHS)

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

124PricesFigure 13.4 Nickel spot price and stock at exchanges

From a peak of just over US$30,000 a tonne in January, the LME nickel
price has continued to fall during 2023. After averaging just over
US$20,000 a tonne in the September quarter 2023, nickel prices havedeclined further in the December quarter 2023, to average around
US$17,600/t. In addition to softening world industrial production (IP) andmanufacturing activity, the nickel market is watching the surge in output inIndonesian — both current and prospective — for a rise in inventories.
The global macroeconomic environment continues to be weighed down by
tighter fiscal and monetary conditions. This has seen a persistent
weakness in global IP and manufacturing activity in recent months, with acontinued contraction in activity in Europe and Asia (excluding China)
offsetting an ongoing modest recovery in Chinese industrial production.
Global construction displayed modest growth through 2023, however there
were pockets of weakness: activity continues to deteriorate in Europe (dueto aggressive monetary policy) and in the Chinese property market.
With significant growth in mined and refined supply projected over theoutlook period, weak demand from key sectors — such as manufacturing
and construction — is expected to put further downward pressure on
nickel prices in 2024. Demand could pick up in 2025 if falling inflation
allows Western central banks move to a less restrictive monetary stance.
Robust growth in refined output in 2023 keeps market in surplus
The surplus seen in the global nickel market since 2022 is expected toreach its peak in 2023, at about 230,000 tonnes. This follows the recent
expansion of nickel refining capacity in China and Indonesia.
The oversupply in class II nickel products — such as nickel pig iron andferronickel — seen in the last 18 months now appears to be carrying over
into class I ‘battery grade’ products (on which exchange-traded contracts
such as LME are based). This is being driven by the continued expansionof nickel smelting and refining capacity, especially in Indonesia. New
HPAL projects are expected to continue being brought online over the
Resources and Energy Quarterly | December 2023

Stocks (thousand tonnes)

LME price continues decline throughout 2023

600

60,000500

50,000400

40,000300

30,000200

20,000100

10,000

0
2016

2017

2018

LME stocks

2019

2020

2021

SHFE stocks

2022

2023

US$ a tonne

13.4

0

LME nickel cash (rhs)

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

outlook period, with these facilities capable of processing lower grade ores
into products such as Mixed Hydroxide Precipitate (MHP), which iscapable of being processed into refined nickel. The projected lift in nickel
refining capacity in China and Indonesia may thus maintain the global
nickel market in surplus in the outlook period.
Class 1 inventories to remain low in 2024 and 2025
While healthy growth in mined and refined nickel supply is expected tocreate a moderate (but reducing) oversupply to 2025, 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. LME
inventories have seen a modest recovery so far in the December quarter,
reaching 44,000 tonnes in mid-November, after hitting a 10-year low of
37,000 tonnes in the June quarter 2023 (Figure 13.4). However, LME
inventories remain at decade-lows. After falling below US$16,000 a tonnein November, the LME nickel price is estimated to average about
US$21,200 a tonne in 2023. A global surplus is expected to stretch into
2024, with prices forecast to average around US$18,000 a tonne.

125Australia

Figure 13.5: Nickel export volumes and values

Stronger production and export volumes are expected over the outlook
period, though this is initially expected to be outweighed by falling global
prices. Export earnings are expected to fall to $3.9 billion in 2023–24,
before increasing to $4.3 billion 2024–25. Export volumes are forecast to
rise from 161,000 tonnes in 2022–23 to 172,000 in 2023–24 (7.1% growth)and 195,000 in 2024–25 (14% growth).
Australian production to grow over the outlook period
Following flat growth in 2022–23, Australian mined nickel production is
forecast to grow to 159,000 tonnes in 2023–24 and 186,000 tonnes in2024–25 (both figures have been revised down from the September
Resources and Energy Quarterly). Contributing to this increase in mine
production will be IGO’s Cosmos project, a further ramp up at Kambalda(Wyloo Metals) and a restart of Black Swan (Poseidon Nickel).
Australian refined nickel production (including refined and intermediate
products) is expected to grow from 134,000 tonnes in 2022–23 to 151,000
tonnes in 2024–25. This growth in output is expected to be driven by aramp up in production at BHP’s Nickel West operations.

Thousand tonnes

Export earnings to be impacted by falling nickel prices

240

6

160

4

80

2

0

2020–212022–23
Export volumes

2024–25

A$ billion

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 remains near decade highs
Nickel and cobalt exploration expenditure for the September quarter 2023
was around $88 million. This was 5.7% higher/lower than the previous
quarter, and 11% higher than the comparable period in 2022. Exploration
for the 12 months to September 2023 was $341 million, and continues ageneral upward trend seen since 2016.
Revisions to the outlook
Compared to the September 2023 Resources and Energy Quarterly, nickel
exports earnings have been revised down by $0.4 billion in 2023–24. Thisis a result of slight downward revision to price forecasts for the period.

Resources and Energy Quarterly | December 2023

126

Table 13.1: Nickel outlook
Annual percentage change
Unit

2022

2023s

2024f

2025f

2023s

2024f

2025f

– mine

kt

3,203

3,729

3,908

4,090

16

4.8

4.7

– refined

kt

3,059

3,344

3,529

3,728

9.3

5.6

5.6

Consumption

kt

2,956

3,119

3,381

3,601

5.5

8.4

6.5

Closing stocks

kt

691

916

1 065

1 191

33

16

12

12.2

15.3

16.4

17.2

26

7.2

5.1

US$/t

25,696

21,477

17,87518,875

-16

-17

5.6

USc/lb

1 166

974

811

856

-16

-17

5.6

US$/t

26,744

21,477

17,38817,931

-20

-19

3.1

USc/lb

1,213

974

789

813

-20

-19

3.1

Unit

2021–222022–23f

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

159

186

-1.4

4.9

16

– refined

kt

98

97

94

104

-1.7

-3.1

11

31

38

45

46

20

19

3.5

kt

155

161

172

195

3.3

7.1

14

– nominal value

A$m

4,405

4,956

3,875

4,285

13

-22

11

– real value e

A$m

4,923

5,175

3,875

4,142

5.1

-25

7

– 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; s Estimate.
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 | December 2023

127

Resources and Energy Quarterly | December 2023

128

Resources and Energy Quarterly | December 2023

129

Summary The outlook for zinc demand remains subdued due to both increased
supply and ongoing weakness in China’s property market. The zincprice is forecast to average US$2,600 a tonne in 2024 and then rise to
US$2,700 a tonne in 2025.
 Australia’s zinc output has fallen in 2023, as some small mines closed.
But output is expected to rise over the outlook period due to theCentury mine expansion and higher Golden Grove mine output.
 Australia’s zinc exports are forecast to fall to $3.9-4.0 billion in 2023–24
and 2024–25, with higher volumes partially offsetting the impact oflower prices.

14.2

World consumption

Global zinc consumption strengthens as China’s property market stabilises
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
manufacturing, construction and automotive sectors. The International
Lead and Zinc Study Group (ILZSG) estimates that world demand rose
0.5% year-on-year in the September quarter 2023. China is the world’s
largest consumer of zinc, and China’s consumption recovered in the
September quarter to rise 2.8% year-on-year. Consumption in the US isestimated to have fallen 10% year-on-year, while the EU fell 4.4% year-onyear.
There are signs that China’s residential property sector is stabilising.
China is prioritising the delivery of its existing construction pipeline, after
worries that liquidity constrained developers had been forced to abandon
projects already started. China’s National Bureau of Statistics reported that
residential floor space completed from January to September 2023 is up
20% year-on-year. This is an improvement compared to the January toJune period, which was up 18.5% year-on-year. However, sales remain
weak, with residential floor space sold from January to September 2023,

Resources and Energy Quarterly | December 2023

down 6.3% year-on-year. This is weaker than the data reported forJanuary to June, which was down 2.8% year-on-year.
Figure 14.1: Zinc consumption vs industrial and steel production
10
Annual percentage change

14.1

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).

China’s passenger vehicle production fell 2.8% year-on-year in the
September quarter 2023 but remains 10% higher than China’s averagequarterly production in 2022. China is emerging as a leading manufacturerof electrical vehicles, which are often less expensive than comparable
models from international competitors. China overtook Japan as theworld’s largest exporter of passenger motor vehicles in H1 2023.
Other major passenger vehicle producers posted production gains in 2023,
as chip shortages affected production over much of 2022. In the
September quarter, Japanese passenger vehicle output rose by 7.5%
year-on-year, while production in Germany rose by 5.9% year-on-year.

130Despite the estimated fall in US and EU zinc usage, indicators of related
construction activity have been positive. US construction spending rose
4.3% in the September quarter 2023 in nominal terms. A large rise in nonresidential construction spending, up 21% year-on-year, was offset by adecline in spending on residential construction, down 5.5% year-on-year.
The rise in non-residential construction spending was driven by
manufacturing (up 65% year-on-year) and computer/electronics (up 146%
year-on-year). US motor vehicle assemblies — the majority of which arecommercial vehicles — rose 3.8% year-on-year in the September quarter.
The EU’s construction production (volume) index rose 1.0% year-on-year
in the September quarter 2023. This was largely due to a low September
quarter 2022 result, when high energy prices — following the Russian
invasion of Ukraine — impacted adversely on economic activity. Prices
have since settled with Europe’s 2022/23 winter the warmest on record.
Demand outlook for zinc faces headwinds
Growth in world zinc consumption is forecast to average 1.0% per year
over 2024 and 2025. This is much slower than the 2009 to 2019 period
when zinc consumption grew by an average of 2.4% per year. China’s
housing market faces much slower growth than at any time over the past
twenty years, with a weak demand outlook due to high levels of building
stock and slowing urban population growth. Residential construction
activity will likely stabilise at a lower level, reducing zinc demand.
Offsetting some of this decline is higher infrastructure spending in Chinaas the government seeks to support the economy. In October 2023, China
issued 1 trillion yuan in bonds to fund new infrastructure spending.
The global energy transition will increase demand for zinc in some sectors
but may also see zinc usage reduced for other applications. Globally, therollout of renewable energy infrastructure is expected to support demandfor zinc due to its role as a key input to wind turbines, solar panels andtransmission towers. However, growing electric vehicle adoption could
also weaken demand for zinc as automakers prefer lighter materials tosteel (in particular, aluminium) to raise the interval between EV recharges.

Resources and Energy Quarterly | December 2023

14.3

World production

Zinc concentrate market tightens as mines closure reduces supply
World mine production fell by 2.2% year-on-year in the September quarter
2023. About a third of global zinc mine production is in China, where mine
production fell 2.6% year-on-year.
The sharp fall in zinc prices since April 2022 has led to the closure ofseveral zinc mines. European production fell 14% year-on-year in the
September quarter 2023. The Tara mine in Ireland — the largest zinc minein Europe — closed in June, and the Aljustrel mine in Portugal closed in
September. Australian production fell 6.1% year-on-year. The unlisted
Australian mining company Aurora Metals entered into administration in
July, resulting in the closure of the Mount Garnet and King Vol mines inAustralia. The Jaguar mine operated by Aeris Resources was placed oncare and maintenance in August.
World refining production rose 8.0% year-on-year in the September
quarter 2023. Output in China — the world’s largest zinc refiner — rose by
15% year-on-year in the September quarter 2023. The surge in refining
capacity in China resulted in a rapid decline in the spot treatment price forzinc ore imported to China. The price fell to US$95 a tonne in October
2023 from an average of US$263 a tonne in the March quarter 2023, when
the closure of some European zinc smelters (due to high energy prices)
resulted in a crunch in global zinc refining capacity.
Projects delayed as outlook for zinc demand remains weakOver the outlook period, world mine output is forecast to average annual
growth of 1.1% (Figure 14.3). The fall in mine production and rise inrefining production over the past year has eliminated much of the surplus
in the concentrate market from earlier this year. The weak demand outlook
suggests growth in zinc production will be slow over the outlook period,
and the opening of new mines expected from Mexico and Russia havealready been delayed. Refined production is expected to rise by 1.0% a
year on average. Most of the new capacity is expected to be in China.

131

12

4

8

0

4

-4

0

2013

2015
2017
Mine production

2019
2021
2023
2025
Mine production change (rhs)-8

Figure 14.4: Zinc prices and stocks
4,000

12

3,000

9

2,000

6

1,000

3

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

14.4

0
2013

PricesPrices weaken on growing concerns over the demand outlook
The London Metal Exchange (LME) zinc spot price declined slightly in the
September quarter 2023 to around US$2,400 a tonne. This compared toan average of about US$3,100 a tonne in the March quarter, when worries
over shortages of zinc refining capacity kept prices high. The price falls
were triggered by the reopening of some European zinc smelters and wassustained by the underlying weakness in demand — as China’s reopening
from COVID lockdowns had failed to deliver the widely expected recovery
in demand.
Zinc inventories have whipped around in 2023. Weak demand over the H1
2023 saw LME zinc stocks rise rapidly over the June quarter to reach 81
thousand tonnes. Stocks then jumped to 148 thousand tonnes by the endof August. However, consumption strengthened over the September
quarter 2023 and LME zinc stocks have since been drawn down to 69
thousand tonnes as at mid-November.

Resources and Energy Quarterly | December 2023

2015

2017
2019
2021
2023
Price
Stocks (rhs)2025

Weeks of consumption

8

The LME (spot) zinc price is forecast to stay relatively low through 2024,
due to the soft demand outlook. The price should average about US$2,600
a tonne before recovering to US$2,700 a tonne in 2025 as growth in theworld economy picks up. (Figure 14.4).

US$ a tonne

16

Annual percentage change

Million tonnes

Figure 14.3: World zinc mine production, metallic content

0

Source: LME (2023); International Lead Zinc Study Group (2023); Department of Industry,
Science and Resources (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) rose 6.8% year-on-year to $1.1 billion in the September
quarter 2023. The rise was driven by a lift in export volumes, while the fallin the zinc price was partially offset by the impact of a weaker AUD/USD.
The increase in export volumes (of both zinc ores and concentrates andalso refined zinc metal) in the quarter exceeded the increase in production,
and was likely due to the timing of shipments. Export volumes of zinc orerose 36% year-on-year, while export volume of refined zinc metal rose
76% year-on-year.

132

Australian mine output is expected to grow by an average 4.8% per year
over the outlook period. Output growth over the next two years will be
driven by an expansion of the Century mine, as well as increases in
production from the Golden Grove mine (following the completion ofventilation upgrades).
From $4.3 billion in 2022–23, Australia’s export earnings for concentrates
and refined zinc (combined) are forecast to fall to $4.0 and $3.9 billion in
2023–24 and 2024–25, respectively. The fall in earnings is due torelatively low prices and mine closures (Figure 14.5).
Exploration expenditure softens in the September quarter
Exploration expenditure for silver, lead and zinc fell 5.7% year-on-year in
the September quarter 2023. Exploration expenditure slumped in 2020 —due to the COVID pandemic — but recovered as zinc prices rose over2021 and 2022. Exploration expenditure is moderating with zinc prices
returning to a lower level.

Resources and Energy Quarterly | December 2023

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

Australian mine output fell 8.1% year-on-year in the September quarter
2023, as the fall in global zinc price resulted in the closure of several small
mines. The Jaguar mine operated by Aeris Resources was placed on careand maintenance in August 2023. The unlisted company Aurora Metals
entered into administration in the July 2023, and two zinc mines owned by
the company have closed as a result. Additionally, the Hera mine, owed by
Aurelia metals, closed early at the end of March 2023.

Figure 14.5: Australia’s zinc exports, metallic content

Thousand tonnes

Higher refined zinc production helped increase refined metal exports, with
Australian production of refined zinc rising 8.6% year-on-year in the
September quarter 2023. The Townsville refinery completed an expansion
project in the March quarter 2023, and is now operating at a higher
capacity. Delays with commissioning this project disrupted production in
2022.

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 September 2023 Resources and Energy Quarterly,
export earnings for 2023–24 have been revised up by 8.9%. The upwardrevision is due to stronger than expected export volume data for H2 2023,
as well as a weaker forecast for the AUS/USD than envisaged in the
September quarter 2023 REQ.
Export earnings for 2024–25 have been revised up by 4.2% due to ahigher zinc price forecast.

133

Table 14.1: Zinc outlook
Annual percentage change
World

Unit

2022

2023 s2024 f

2025 f

2023 f

2024 f

2025 f– minekt

12,42812,33812,436

12,592

-0.7

0.8

1.3

– refined akt

13,353

13,47813,592

13,762

0.9

0.8

1.2

Consumption

kt

13,454

13,38913,49013,646

-0.5

0.8

1.2

Closing stocks

kt

653

742

844

960

13.7

13.7

13.7

2.5

2.9

3.3

3.7

14.3

12.85

12.6

US$/t

3,485

2,654

2,559

2,665

-23.8

-3.6

4.1

USc/lb

158

120

116

121

-23.8

-3.6

4.1

US$/t

3,627

2,654

2,490

2,531

-26.8

-6.2

1.7

USc/lb

165

120

113

115

-26.8

-6.2

1.7

Production– 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

1,165

1,190

1,280

-7.3

2.1

7.6

Refined output

kt

435

410

444

505

-5.8

8.4

13.7

– ore and concentrate c

kt

2,033

1,886

2,133

1,985

-7.2

13.1

-7.0

– refined

kt

313

388

431

476

23.9

11.1

10.3

– total metallic content

kt

1,220

1,247

1,392

1,370

2.3

11.6

-1.6

– nominal

A$m

4,506

4,315

3,951

3,903

-4.2

-8.4

-1.2

– real d

A$m

5,036

4,506

3,951

3,773

-10.5

-12.3

-4.5

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 | December 2023

134

Resources and Energy Quarterly | December 2023

135







Summary

Lithium export earnings are forecast to fall as lower prices more thanoffset higher export volumes. Exports will be $14-15 billion in 2023–24
and 2024–25, down from record levels ($20 billion) in 2022–23.
Price declines since the September quarter reflect rising lithium
inventories. High-cost producers have become unprofitable and havecut output. Australia’s Greenbushes lithium mine (the world’s largest)reported stockpiling of surplus production and flagged the prospect of
future output cuts if weakness in prices and demand persists. However,most producers remain profitable at current prices.
Three Australian lithium hydroxide refineries are either operating or
under construction, targeting a total capacity of 198 thousand tonnes(kt) of lithium hydroxide. By 2030, close to 20% of Australian spodumene
could be refined domestically. Investments have also been made in lowemissions refining technology including a lithium phosphate refinery.

15.2

World demandHigh growth outlook for lithium demand, but some near term challenges fordownstream markets such as the EV sector
The high growth trajectory consensus forecast for global lithium demand isdriven by government policies to increase electrification and decarbonise
the global economy. Lithium is a key input to the global energy transition,
making up a sizeable share of the cost of the most popular batteries(expected to be) used in electric vehicles (EVs) and stationary energy
storage systems (ESS). In lithium carbonate equivalent (LCE) terms,
global lithium consumption is forecast to increase from 797 kt in 2022 to
1,428 kt in 2025 (Figure 15.1).
Since the September REQ, there have been reports highlighting weakness
in the EV sector, particularly in the United States. EV manufacturers
including General Motors, Ford and Tesla have delayed some investments
in factories in response to disappointing EV sales growth and the broader
economic slowdown.

Resources and Energy Quarterly | December 2023

Figure 15.1: World lithium consumption, by demand source
1,600
1,400
thousand tonnes LCE

15.1

1,200
1,000
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)

One reason why US EV sales appear to have been below expectations is
the relatively high prices for EVs in the US compared to other markets
such as China. Since 2022, some EV manufacturers (such as Tesla) haveengaged in a price war in the Chinese market. For example, it is estimatedTesla’s Model Y SUV costs 40% less in China than in the US (as ofJanuary 2023). More broadly, Chinese EV carmakers have focused on
smaller and more affordable models, cutting down costs. The IEA reports
the two best selling EVs in China in 2022 were the Wuling Mini BEV(US$6,500) and the BYD Dolphin (US$16,000). In contrast, EV carmakers
in Europe and the US have prioritised larger and more luxurious models to
date. In 2022, the Tesla Model Y was the best selling EV in Europe(US$65,000) and the United States (US$50,000).
Recently, some US EV makers are reported to have begun making pricecuts. However, this appears to largely be in response to the recent
slowdown in sales as opposed to a broader shift to better affordability by
EV makers in the US and Europe.

136

To achieve the ambitious targets set by governments for EV uptake by2030, it is necessary for EVs to become more cost competitive withinternal combustion engine vehicles. In China, the country’s National
Action Plan sets a target of 40% sales share for ‘new energy vehicles’(includes electric and fuel cell vehicles) by 2030. In the European Union(EU), the ‘Fit for 55’ package requires new car sales to have 55% lower
emissions from 2030 and zero CO2 emissions from 2035. The US istargeting ‘clean energy vehicles’ including EVs to make up a 50–52%
share of vehicle sales by 2030.

Other sources of lithium demand to maintain growth outlook

The outlook for EV demand is largely determined by government targets
and the high levels of policy support directed to the sector. Global EV
sales are projected to more than double between 2022 and 2025
(11 million to almost 25 million cars per annum) (Figure 15.2). EVs are thedominant source of demand for lithium (and batteries), making up 60% of
lithium consumption in 2022.

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.

15.3

Figure 15.2: Global electric vehicles sales

Growing global lithium extraction leading to a short-term surplus of supply

25

million units

20
15

World production

Reflecting surplus supply, global lithium inventories are rising following a
prolonged deficit in the last few years. The surplus is due to higher
extraction of lithium from mineral concentrate (e.g. spodumene andlepidolite) and brine sources. Higher extraction is largely in response to arecovery in lithium prices in 2021 and the record highs set in 2022.
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). Prices are expected to remain above pre2021 levels, enabling higher cost producers and projects to enter themarket.

10
50Other sources of battery demand for lithium will also experience strong
growth, largely driven by efforts to spur the energy transition. This willreflect higher uptake of ESS, electrification of tools and products (such as
electric scooters), and growth in portable electronics. ESS demand forlithium is expected to more than double between 2022 and 2025, driven by
demand growth from major economies including China, the EU, and the
US. The demand for lithium for non-EV battery usage is expected toincrease by 68% between 2022 and 2025.

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
China
EuropeUnited States
Other

Note: Electric vehicles (EVs) are defined to be battery EVs and plug-in hybrid EVs.

Australia leads the world in lithium extraction, accounting for 50% of global
output in 2022. Spodumene production is forecast to increase from 386 kt
in 2022 to 633 kt LCE in 2025 period (see Australia section). Most
Australian spodumene is exported and processed into lithium hydroxide orcarbonate overseas (mostly China). However, investments in domestic

Source: Wood Mackenzie (2023)

Resources and Energy Quarterly | December 2023

137

refineries will result in a rising share of spodumene being processed
domestically.

Figure 15.4: Share of global lithium refining
100%

Amongst other major producers, Chile and China are the two largest
sources of lithium extraction. Chile is expected to see further growth inlithium extraction (from brine sources) over the outlook period, rising from162 kt in 2022 to 227 kt LCE in 2025. Brine is refined into lithium
carbonate which is typically exported to other markets.

90%

China is also forecast to increase lithium extraction (from brine and minesources) from 166 kt LCE in 2022 to 373 kt LCE by 2025. Notwithstanding
its own production, China is a net importer of lithium resources, buying
lithium from countries such as Australia and Chile.

40%

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

Figure 15.3: Global lithium extraction by country

thousand tonnes LCE

60%
50%
30%
20%
10%
0%

2020
China
Australia
Recycling

2021

2022

2023

Chile
United States

2024

2025

Argentina
Other countries

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

1,600

Global supply of refined lithium products to diversify over outlook period

1,400

Lithium bearing ores/brines are processed into a product for downstream
applications. Refined lithium products include lithium hydroxide (often usedin NMC batteries) and lithium carbonate (favoured in LFP batteries).
Refined lithium chemicals are used in the production of active materials
that are part of the cathode of the battery. Batteries need high purity
materials, so making battery-grade lithium is a complex chemical process.

1,200
1,000
800
600
400
200

Australia

70%

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

1,800

0

80%

2020
Chile

2021
China

2022
Argentina

2023
Canada2024
Zimbabwe

2025
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.
Source: Department of Industry, Science and Resources (2023), Wood Mackenzie (2023)

Resources and Energy Quarterly | December 2023

The global supply of refined lithium products is highly concentrated, withthe top three producers having around a 90% market share (Figure 15.4).
China is the dominant producer of refined lithium and is expected tomaintain its share at about 60% of global refining capacity by 2025.
China’s high market share is supported by the cost competitiveness of its
refineries and a dominant share in downstream markets in the battery
supply chain that use refined lithium products. Other major refined lithiumproducers include Argentina and Chile which extract lithium from brine.

138

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 maintain a 2–3% share over the outlook period.

15.4

PricesLithium prices to decrease as market enters a period of surplus production
During 2022 and early 2023, prices for lithium reached levels well above
previous records as the market moved to a large deficit. 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 to2021 (Figure 15.5). The spot price of lithium hydroxide (a refined lithiumproduct) averaged US$67,279 per tonne in 2022, dramatically higher than
the average price of US$13,656 per tonne over the 3 years to 2021.
In 2023, prices have fallen significantly as the market has swung fromdeficit to surplus. The high prices in 2021 and 2022 incentivised moreinvestment in lithium production, resulting in growth in supply outpacing
demand. Adding to this, lithium consumers destocked during the period ofhigh prices to lower the cost of carrying inventory.

7

84

6

72

5

60

4

48

3

36

2

24

1

12

0
Jan-180

Jan-19Jan-20Spodumene China (LHS)

Jan-21

Jan-22

Jan-23'000 US$ per tonne'000 US$ per tonne

Figure 15.5: Average monthly lithium spot prices

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.

In the near-term, the demand for lithium is facing headwinds due to slower
than expected growth in EV uptake in recent months, especially in the US.
The average price over the month of October 2023 was US$2,168 andUS$25,327 per tonne for spodumene and lithium hydroxide, respectively.
To account for recent further price falls, lithium price forecasts have beenrevised downward compared to the September REQ, especially for lithiumhydroxide. For spodumene, the average spot price has been revised downby 5-10% for each year of the outlook period. For lithium hydroxide, theaverage price has been revised downward by 10-30% for each year of theoutlook period. These revisions are line with consensus forecasts.
Notably, prices are not expected to return to previous high levels (such as
during 2022 and early 2023) before 2025, due to the forecast surplus in
supply over the outlook period. This appears to have already incentivisedsome production cuts, with reports that some higher-cost producers, suchas lepidolite miners in China, have become unprofitable and cut
production. However, most lithium producers will remain profitable atcurrent prices and continue to produce. In Australia, the five largest lithium
mines (covering 99% of Australian spodumene production) reported theiraverage costs of production per tonne over the 2022–23 financial year torange from A$670 to A$1225. Notably, these estimates are based on costs
reported by mines and does not account for differences in the lithiumcontent spodumene.
The spot price of spodumene is estimated to average US$3,840 per tonnein 2023 and forecast to fall to US$2,200 in 2025. The spot price of lithiumhydroxide is estimated to average US$52,450 in 2023 but is forecast to
decline to average around US$30,000 per tonne in 2025.
In terms of risks for the price forecasts, there is an unusually high degreeof uncertainty. The lithium market has undergone significant structuralchange in recent years due to new producers entering the market and therapid pace of EV demand growth.

Source: Bloomberg (2023)

Resources and Energy Quarterly | December 2023

139

Australia

Lithium mines expected to continue to increase production over outlook
Australia is the leading global source of lithium (50% share of extraction in2022), and mine output is expected to lift further after recent capital
expenditure. The output of spodumene is forecast to rise to 3.4 million
tonnes (Mt) in 2023–24 and 4.0 Mt in 2024–25, up from to 3.1 Mt in 2022–
23 (Figure 15.6).
Rising mine production will be driven by the expansion of existing mines,
including Greenbushes, Finniss, Wodgina, Pilgangoora, Mt Marion and Mt
Cattlin. Over the outlook period, greenfield production is also due tocommence at Mt Holland and Kathleen Valley.
Since the September REQ, falls in lithium prices have led to some mines
reporting stockpiling and the prospect of production cuts. Greenbushes(the world’s largest lithium mine, based in Australia) reported it was
stockpiling spodumene output, and flagged future production cuts if
weakness in prices and demand persists.
Growing domestic processing as Australian lithium refineries to ramp up
Australia is continuing to develop new lithium refining capacity. There arethree lithium hydroxide refineries either operating or under development(two based in Kwinana and one in Kemerton) with a combined target
capacity of 198 kt of lithium hydroxide. This suggests Australia could refineclose to 20% of spodumene mined in Australia domestically.
The first is Tianqi Lithium Corporation (51%) and IGO’s (49%) Kwinana
refinery. Technical challenges (primarily debottlenecking) have meant a

Resources and Energy Quarterly | December 2023

Figure 15.6: Australian output of lithium ores and chemicals
5

100

4

80

3

60

2

40

1

20

0

2015-162018-19
Spodumene (LHS)

2021-222024-25
Lithium hydroxide (RHS)

thousand tonnes

15.5

slower than expected ramp up of production at this new facility. Total
output was 0.6 kt in the September quarter, and the facility is expected to
be at 50% of capacity by the end of this year.

million tonnes

Prices received by lithium mines typically reflect falling spot prices with alag due to the use of offtake agreements with specified pricing terms.
Albemarle reports that only 20% of sales are via spot markets, with theremainder based on contract sales typically linked to a price index with a
3-month lag, alongside some floors and ceilings for prices. Pilbara
Minerals report a 2-month pricing period (including month of shipment) sothat prices are better aligned with the time of delivery to the consumer.

0

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

The second Kwinana refinery — owned by Wesfarmers (50%) and SQM(50%) — remains under construction, with first production expected in
2024 and an eventual capacity of 50 kt per year.
The Kemerton lithium hydroxide refinery — owned by Albemarle — isreported to be in operation. In May 2023, a commitment was made to an
expansion to double capacity to 100 kt and this expansion is currently
under construction.
In August 2023, Pilbara Minerals and Calix Limited committed to theconstruction 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 toconventional coal/gas kiln). This facility is only expected to produce over
3 kt of lithium phosphate at full capacity, to demonstrate the viability of thistype of low emissions refining technology.

140

Lithium exports reached a record $20 billion in 2022–23, a significant
increase from the previous record of $5.0 billion in 2021–22 (Figure 15.7).
The increase was driven by a near-tripling in prices over the period, as
well as a 46% lift in the volume of spodumene exports. In 2022–23, 98% of
spodumene by volume was exported to China, with the rest exported tonations such as Belgium (1.2%), South Korea (0.5%), and the US (0.1%).
The value of lithium exports is forecast to decline to around $14 billion in
2023–24, reflecting the lower prices compared to the previous financial
year. Total lithium export earnings are then forecast to increase to$15 billion in 2024–25, as volumes rise with prices forecast to be littlechanged year on year.
Revisions to the outlook
Significant revisions have been made to the forecasts for Australian lithium
export earnings compared to the September 2023 Resources and Energy
Quarterly. In 2023–24 and 2024–25, the value of exports has been revised
downward by 23% and 6% respectively. These revisions are driven byrevisions to price forecasts (see Prices section).

Resources and Energy Quarterly | December 2023

Figure 15.7: Value of Australian lithium exports
21
18
15
A$ billion

Record lithium export earnings to decrease as prices decline

12
9
6
3
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 before this date comes 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 (2023).

141

Table 15.1: Lithium outlook
Annual percentage change
World

Unit

2022

2023f

2024f

2025f

2023f

2024f

2025f

Production a b

kt

737

985

1 271

1 528

33.6

29.0

20.2

Demand a

kt

802

1,022

1,252

1,444

27.6

22.5

15.4

– nominal

US$/t

4 364

3 842

2 300

2 200

-12.0

-40.1

-4.3

– real c

US$/t

4,542

3,842

2,237

2,090

-15.4

-41.8

-6.6

– nominal

US$/t

67,27952,43731,066

29,715

-22.1

-40.8

-4.3

– real c

US$/t

70,022

52,43730,22028,228

-25.1

-42.4

-6.6

Australia

Unit

2021–222022–23s

2023–24f

2024–25f

2022–23s

2023–24f

2024–25f

kt

2,130

3,088

3,420

4,031

45.0

10.8

17.9

– Ore and concentrate (spodumene) d

kt

2,248

3,282

3,050

3,432

46.0

-7.1

12.5

– Refined (lithium hydroxide)

kt

0

0

40

89

-100.0NA

122.1– Ore and concentrate (spodumene) d

A$m

4,899

20,11012,04011,345

310.5

-40.1

-5.8

– Refined (lithium hydroxide)

A$m

0

0

1,829

3,851

-100.0NA

110.5– Total (nominal) d g

A$m

4,972

20,194

13,91815,242

306.2

-31.1

9.5

– Total (real) d g h

A$m

5,556

21,085

13,91814,734

279.5

-34.0

5.9

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 (2023);
Wood Mackenzie (2023).

Resources and Energy Quarterly | December 2023

142

Trade summary tables

Table 17.1: Principal markets for Australia’s total resource and energy exports
Unit

2018–192019–20

2020–212021–222022–23

Share(2022-23)

China

$m

111,167

126,595

148,787

149,538

165,102

35%

Japan

$m

50,60545,53934,22375,941

98,962

21%

Other Asia a$m34,64829,54633,491

46,261

51,52311%

Korea, Rep. of$m21,74621,42323,042

43,21045,066

10%

India

$m

14,427

9,449

11,612

26,41821,265

5%

EU28

$m

11,616

18,633

15,546

13,711

14,386

3%

Other b$m

35,86238,304

41,793

66,61270,007

15%

Total

$m

280,071289,489

308,494

421,691

466,310-Notes: a Other Asia excludes China, Japan, South Korea and India b may include ‘No Country Detail’ where various confidentiality restrictions may apply, see International Merchandise Trade,
Australia: Concepts, Sources and Methods 2018 Data confidentiality for more information.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department of Industry, Science and Resources (2023)

Table 17.2: Principal markets for Australia’s iron ore exports
Unit

2018–192019–20

2020–212021–222022–23

China$m63,46784,786

124,820

108,307

104,783

Japan

$m

5,757

7,038

9,080

10,257

8,077

Korea, Rep. of

$m

4,667

6,222

9,033

8,293

6,887

Taiwan

$m

1,768

1,876

3,070

2,793

1,978

India

$m

237

21

9

34

67

Indonesia

$m

44

27

40

38

38

Other a

$m

1,614

2,891

6,922

2,766

2,270

Total

$m

77,553102,861

152,975

132,489

124,101

Notes: a may include ‘No Country Detail’ where various confidentiality restrictions may apply, see International Merchandise Trade, Australia: Concepts, Sources and Methods 2018 Data
confidentiality for more information.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly | December 2023

144

Table 17.3: Principal markets for Australia’s LNG exportsa
Unit

2018–192019–20

2020–212021–222022–23Japan$m

21,21019,928

11,64924,80034,508China$m17,482

16,277

11,377

21,42019,833

South Korea

$m

5,307

5,161

3,343

11,47318,310

Taiwan

$m

2,343

2,593

2,237

7,521

12,070Singapore

$m

1,237

1,039

175

2,377

3,165

Malaysia

$m

872

1,456

499

559

2,121

Other b

$m

1,276

1,071

1,198

2,421

2,232

Total

$m

49,72747,52530,47770,571

92,238

Note: a Department of Industry, Science and Resources estimates based on International Trade Centre data. b may include ‘No Country Detail’ where various confidentiality restrictions may apply,
see International Merchandise Trade, Australia: Concepts, Sources and Methods 2018 Data confidentiality for more information.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; International Trade Centre (2023); Department of Industry, Science and Resources (2023)

Table 17.4: Principal markets for Australia’s thermal coal exports
Unit

2018–192019–20

2020–212021–222022–23Japan$m

11,630

8,347

7,009

23,81937,724

Taiwan

$m

3,162

2,386

2,060

6,636

9,456

Korea, Rep. of

$m

3,812

2,843

2,568

6,819

4,774

China

$m

4,230

3,930

487

0

3,505

Malaysia

$m

905

534

560

1,432

2,363

Vietnam

$m

664

1,041

711

1,688

2,205

Other a

$m

1,555

1,295

2,613

5,863

5,495

Total

$m

25,95820,376

16,00946,25865,522

Notes: a may include ‘No Country Detail’ where various confidentiality restrictions may apply, see International Merchandise Trade, Australia: Concepts, Sources and Methods 2018 Data
confidentiality for more information.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly | December 2023

145

Table 17.5: Principal markets for Australia’s metallurgical coal exports
Unit

2018–192019–20

2020–212021–222022–23India$m

11,242

7,489

7,580

20,88917,078

Japan

$m

7,657

6,084

4,744

14,131

15,630

Korea, Rep. of

$m

4,023

3,033

2,732

9,430

8,249

Taiwan

$m

2,597

1,993

1,332

3,967

3,752

Netherlands

$m

1,792

1,242

885

4,102

3,609

China

$m

9,890

9,777

1,668

0

492

Other a

$m

6,436

4,626

4,246

15,07013,092

Total$m

43,63734,24523,187

67,58861,901

Notes: a may include ‘No Country Detail’ where various confidentiality restrictions may apply, see International Merchandise Trade, Australia: Concepts, Sources and Methods 2018 Data
confidentiality for more information.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department of Industry, Science and Resources (2023)

Table 17.6: Principal markets for Australia’s gold exports
Unit

2018–192019–20

2020–212021–222022–23

China

$m

5,072

824

2,028

8,179

8,141

Hong Kong

$m

4,370

3,341

1,410

4,893

3,778

Singapore

$m

1,589

1,423

2,933

1,607

3,480

Switzerland

$m

1,161

1,899

1,889

1,878

2,239

India

$m

578

66

1,474

1,928

1,508

United States

$m

127

3,079

3,937

1,382

1,251

Other a$m

5,969

13,762

12,433

3,334

4,008

Total

$m

18,867

24,394

26,10523,20024,406

Notes: a may include ‘No Country Detail’ where various confidentiality restrictions may apply, see International Merchandise Trade, Australia: Concepts, Sources and Methods 2018 Data
confidentiality for more information.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly | December 2023

146

Table 17.7: Principal markets for Australia’s lithium exports
Unit

2018–192019–20

2020–212021–222022–23

China

$m

na

na

na

4,725

19,828Belgium

$m

na

na

na

85

169

Korea, Rep. of

$m

na

na

na

46

90

United States

$m

na

na

na

37

15

Other a

$m

na

na

na

7

8

Total

$m

na

na

na

4,899

20,110Notes: a may include ‘No Country Detail’ where various confidentiality restrictions may apply, see International Merchandise Trade, Australia: Concepts, Sources and Methods 2018 Data
confidentiality for more information.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department of Industry, Science and Resources (2023)

Table 17.8: Principal markets for Australia’s crude oil and refinery feedstocks exportsa
Unit

2018–192019–20

2020–212021–222022–23

Singapore

$m

1,946

1,360

1,661

1,512

1,470

Korea, Rep. of

$m

694

337

89

649

1,093

China

$m

1,008

1,033

161

158

1,015

Thailand

$m

1,120

618

365

0

898

Malaysia

$m

1,640

1,013

658

47

948

Japan

$m

301

137

91

219

222

Other b

$m

2,362

4,510

4,409

11,447

7,547

Total

$m

9,071

9,009

7,434

14,031

13,192

Note: Department of Industry, Science and Resources estimates based on International Trade Centre data; b may include ‘No Country Detail’ where various confidentiality restrictions may apply,
see International Merchandise Trade, Australia: Concepts, Sources and Methods 2018 Data confidentiality for more information.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; International Trade Centre (2023); Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly | December 2023

147

Table 17.9: Principal markets for Australia’s copper exports
Unit

2018–192019–20

2020–212021–222022–23

China

$m

3,606

3,787

2,747

1,958

2,351

Korea, Rep. of

$m

683

651

1,315

1,375

1,415

Malaysia

$m

1,241

824

850

961

1,084

India

$m

444

463

626

941

457

Japan

$m

1,833

2,126

17

18

1

Other a

$m

1,962

2,357

5,885

6,875

6,964

Total

$m

9,770

10,208

11,44012,12812,271

Notes: a may include ‘No Country Detail’ where various confidentiality restrictions may apply, see International Merchandise Trade, Australia: Concepts, Sources and Methods 2018 Data
confidentiality for more information.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; Department of Industry, Science and Resources (2023)

Table 17.10: Principal markets for Australia’s alumina exportsa
Unit

2018–192019–20

2020–212021–222022–23

Bahrain

$m

0

0

0

923

1,559

UAE

$m

29

0

0

747

1,075

South Africa

$m

921

577

na

433

660

Canada

$m

17

0

0

424

638

Mozambique

$m

644

453

54

431

573

Otherb

$m

8,633

6,401

6,894

6,019

3,804

Total

$m

10,245

7,431

6,948

8,977

8,308

Note: Department of Industry, Science and Resources estimates based on International Trade Centre data; b may include ‘No Country Detail’ where various confidentiality restrictions may apply,
see International Merchandise Trade, Australia: Concepts, Sources and Methods 2018 Data confidentiality for more information.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; International Trade Centre (2023); Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly | December 2023

148

Table 17.11: Principal markets for Australia’s aluminium exportsa
Unit

2018–192019–20

2020–212021–222022–23

Korea, Rep. of

$m

768

1,138

905

1,029

1,538

Japan

$m

1,320

1,016

956

1,505

1,319

United States

$m

841

247

256

596

533

Thailand

$m

392

290

349

521

347

Taiwan

$m

293

360

417

618

319

China

$m

17

29

118

132

78

Other b

$m

535

612

762

1,309

1,147

Total

$m

4,166

3,692

3,763

5,710

5,282

Note: Department of Industry, Science and Resources estimates based on International Trade Centre data; b may include ‘No Country Detail’ where various confidentiality restrictions may apply,
see International Merchandise Trade, Australia: Concepts, Sources and Methods 2018 Data confidentiality for more information.
Source: ABS (2023) International Trade in Goods and Services, 5368.0; International Trade Centre (2023); Department of Industry, Science and Resources (2023)

Resources and Energy Quarterly | December 2023

149

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 | December 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 (2022)

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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 (2022)

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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

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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

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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

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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)

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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

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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 a five year outlook

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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.
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.

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.
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 12 December 2023.

Resources and Energy Quarterly publication schedule
Publication

Expected release date

Outlook period final year

March 2024

27 March 2024

Australian data: 2028–29
World data: 2029

June 2024

1 July 2024

Australian data: 2025–26
World data: 2026

September 2024

30 September 2024

Australian data: 2025–26
World data: 2026

December 2024

20 December 2024

Australian data: 2025–26
World data: 2026

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

Resources and Energy Quarterly | December 2023

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