The impact of the puncturing of the resources boom is well and truly upon us.
Figures released yesterday by ABARE (The Australian Bureau of Agricultural And Resource Economics) shows an 18% fall in export earnings for our resources sector in the March quarter.
Lower prices and production were the main drivers (even though prices are on the rise) and there will be another sharp fall in the quarter as the huge cuts in contracted iron ore and coal prices kick in with Asian buyers from April 1.
We already have a flavour of those falls with Rio Tinto negotiating an average 37% cut in iron ore export prices with steel mills in Japan, Taiwan and South Korea.
BHP has confirmed that its coking coal price contracts for the 2010 shipping year will be priced at levels around 58% lower than in the year to March, 2009.
ABARE said export earnings for the March quarter were $38.7 billion, down from $47.2 billion in the December quarter.
The index of export prices of Australian energy and mineral resources fell 15% in the March quarter, the bureau said.
The energy export price index decreased by 17% and prices for metals and related minerals decreased by 8%.
"Australian production of mineral commodities was lower in the March quarter with only around 30 % of commodities covered recording increased production," ABARE said.
"The Australian dollar averaged US66.6 cents in the March quarter 2009, slightly lower than the US67.4 cents average of the previous quarter.
"Reflecting this, movements in the exchange rate had a negligible influence on export values in the quarter."
But with the exchange rate certain to average above 75 USc in the current quarter, the impact on falling revenues will be much more important and will hurt quite a lot of miners.
“The decrease in export earnings reflects softer world prices and lower export volumes for most commodities,” said Phillip Glyde, ABARE Executive Director, said in a statement with the report.
Mr Glyde said gold was the only major commodity to have had higher export volumes and prices in the March quarter compared with the December quarter 2008.
That wasn’t surprising given the strong demand for gold in the quarter from investors after physical metal, and from Exchange Traded Funds, the biggest investment buyers of metal in the past year.
Commodities such as metallurgical coal, crude oil, copper and liquefied natural gas experienced significant declines in export values.
Iron and steel export earnings dropped 48%, bauxite 43% and earnings from diamond shipments fell 42%.
Commodities recording large declines in export earnings in the March quarter included: iron and steel down $200 million (48%) to $218 million; bauxite down $25 million (43%) to $33 million; diamonds down $68 million (42%) to $95 million; metallurgical coal down $4.9 billion (39%) to $7.6 billion; copper down $565 million (36%) to $1 billion; and LNG down $1.3 billion (35%) to $2.5 billion.
This was offset to some extent by commodities which recorded significant increases in export earnings in the March quarter including: rutile concentrate up $34 million (53%) to $98 million; refined gold up $1.5 billion (39%) to $5.4 billion; uranium oxide up $47 million (19%) to $293 million; synthetic rutile up $9 million (15%) to $68 million; ilmenite concentrate up $5 million (14%) to $42 million; and petroleum refinery products up $16 million (8%) to $210 million.
With the exception of gold, the rises were too small to go anyway towards offsetting the sharp falls for coal, iron ore and LNG.
ABARE said that production of the majority of Australia’s major mineral and energy commodities was lower during the quarter.
Production was lower in the March quarter 2009 compared with the December quarter 2008, with only around 30% of commodities recording production increases.
Significant production declines occurred for: intermediate nickel (45%); refined nickel class 2 (40%); refinery liquefied petroleum gas (LPG) (38%); mined silver (36%); iron and steel (35%); and zinc ores and concentrates (24%).
ABARE’s said its latest forecasts of production, exports and prices for 2009-10 for Australia’s key mineral resource commodities will be published on June 23.
Meanwhile, the Australian Bureau of Statistics said this week that exploration spending fell noticeably in the March quarter, compared with the March quarter of last year.
The fall is a consequence of the slump and the impact of lower revenues for exports (as outlined by ABARE).
The Bureau said the seasonally adjusted estimate of mineral exploration expenditure fell $108.3m (or 17.9%) to $495.9 million in the quarter.
The largest falls were in Western Australia (down $63.4m or 18.7%) and South Australia (down $20.4m or 31.4%).
In original terms, mineral exploration expenditure fell $245.0m (37.8%).
Western Australia had the largest fall of $139.8m (38.4%), followed by South Australia which fell $32.0m (47.1%).
In original terms, exploration on areas of new deposits fell $88.9m (37.4%), while expenditure on areas of existing deposits fell $156.2m (38.0%).
In original terms, the largest fall by minerals sought came from expenditure on iron ore exploration (down $76.9m or 42.1%), with the largest fall occurring in Western Australia.
The next largest fall came from expenditure on nickel/cobalt exploration (down $37.3m or 47.5%).
In seasonally adjusted terms, total metres drilled fell 29.9% in the March qu
