There were some very optimistic forecasts around this week for mineral demand and prices.
Rio Tinto, of course, spoke of 15 years of exponential growth for key commodities; thanks to rising Chinese and then Indian demand.
Our story on unconventional gas talks (see above) about the International Energy Agency’s belief that rising demand from China, India and the rest of the ASEAN countries will lead to greater demand for energy over the next 20 years.
Rio saw the Chinese economy growing by 9%-10% this year and the World Bank added its bit for a 9.7% estimate.
India wants to lift growth from around 8% next year to where it overtakes China in around five years’ time.
Earlier in the week a senior Westpac economist told the Paydirt conference in Perth that prices of aluminium, copper, nickel, lead and zinc will rise faster than gold this year because of growing industrial demand for these base metals from emerging economies.
Seeing copper, zinc, lead and nickel have all had solid rises in the past year already, that’s an interesting forecast.
Westpac Banking senior international economist Huw McKay said gold price was unlikely to fall below $US1,000 per ounce and there was potential for a rise beyond the current $US1100 bounce level.
"We see $US1000 on the gold price as the rough floor," Mr McKay told the Pay Dirt conference on Monday.
"We don’t see immense upside in our formal forecasts but we acknowledge very much that it is there.
"But he was more optimistic about base metals, which he said would have a stellar run in 2010, much as gold did last year.
"It has been an incredible 12 months for the gold price, predominantly driven by safe haven flows.
"The gold price is not going to do as well in relation to other commodities as it did in 2009.
"That doesn’t mean the gold price is going down, it is just that the relativities to other commodities which are much more leveraged to the industrial cycle are going to start catching up."
He said gold is going to lose some relative ground, with some modest downside risk in the short term, and then a very slow grinding price rise.
And figures released by ABARE (The Australian Bureau of Agricultural and Resource Economics) confirmed that iron ore and coal export volumes increased to record levels in the December quarter 2009.
Strong demand from Japan, Korea and China saw iron ore export volumes rise to 98 million tonnes and coal exports exceed 74 million tonnes.
With the growth now projected for this year, iron ore exports will top the 100 million tonnes a quarter level from now on, or more than 400 million tonnes in 2010.
Despite a 9% increase in the value of the Australian dollar, Australia’s energy and mineral resources export earnings increased by 1% to $31 billion in the December quarter.
ABARE said higher world prices for metals and other minerals such as aluminium, copper, gold and zinc largely offset the effect of the higher Australian dollar in the quarter.
(And if Mr McKay from Westpac is on the money, these higher prices this year should help offset the impact of a rising dollar, which he sees going to parity with the US currency.)
Commodities which recorded significant increases in export earnings include: silver up 31% to $67 million, bauxite up 50% to $45 million, diamonds up 51% to $89 million, manganese ores and concentrates up 33% to $315 million, gold up 13% to $3 billion and iron and steel up 12% to $225 million.
Commodities which recorded significant declines in export earnings include: uranium oxide down 37% to $182 million, metallurgical coal down 7% to $5.3 billion, thermal coal down 9% to $2.9 billion and iron ore down 5% to $6.8 billion.
Thermal and metallurgical coal and iron ore are all in the process of being re-priced in new contracts, with rises of 55% and more being won by the likes of BHP and Rio Tinto from major buyers outside China.
ABARE said production was higher in the December quarter compared with the September quarter, with more than half of the commodities recording increases.
"Increased production was recorded for intermediate nickel (160 per cent), diamonds (53 per cent), iron and steel (14 per cent) and refined nickel class 1 (13 per cent).
"Diamond production increased significantly during the December quarter 2009 because of increased production from Rio Tinto’s Argyle mine.
"Iron and steel production rose, mainly because of higher production from Bluescope’s Port Kembla and Onesteel’s Whyalla operations.
"For nickel, increased production, both refined and intermediate, was a result of higher output from BHP Billiton’s Nickel West operations.
"Significant production declines occurred for uranium oxide (39 per cent), mined zinc (26 per cent) and refined copper (11 per cent).
"Uranium oxide and refined copper production declined in the December quarter 2009 because of the production disruption at BHP Billiton’s Olympic Dam in October 2009. The prime haulage shaft, which transports 75 per cent of the mine’s ore to the surface, suffered a mechanical failure.
"Zinc production declined as a result of reduced production from Minmet’s Century mine in Queensland because of damage to the main pipeline that transports zinc concentrates from the mine to the export port.
"Crude oil production during the December quarter 2009 declined by 3 per cent to 6.7 gigalitres compared with the September quarter.
"The fall in production reflected
