SYDNEY, June 25 (Reuters) – Australia revised down its 2015 iron ore and metallurgical coal price forecasts as rising output of two of the country’s biggest export earners outstrips demand, raising concerns for mining companies already struggling with shrinking profit margins.
Robust growth in export tonnages meant Australia would still post an 11 percent rise in total export earnings for mineral and energy comodities in 2013-14, the Bureau of Resource and Energy Economics (BREE) said in a quarterly update.
Analysts warn, though, that Australia’s powerful mining industry is facing a prolonged stretch where commodities will fetch prices well below those of the now-defunct mining boom years. BREE lowered its price forecast for iron ore to an average $94.60 a tonne in 2015 from a previous forecast of $100.80, citing growing competition to sell into China’s steel market.
Although steel production in China is forecast to increase in 2015, competition among iron ore exporters to sell their additional production is expected to intensify, it said, while a strong Australian dollar would also drag on local miners.
“This will draw a sharp focus towards managing costs and enhancing productivity in the sector,” said Wayne Calder, deputy executive director of BREE.
The warning comes a day after the world’s biggest miner, BHP Billiton, said it was looking at more job cuts at its flagship Australian iron ore division as pressure mounts to rein in spending.
The Reserve Bank of Australia cited the drag from lower commodity prices when it kept interest rates at record low of 2.5 percent this month, with the market expecting rates to stay low for many months to come.
BREE’s forecast iron ore price for 2015 is just above the current price of $93.30 .IO62-CNI=SI, following a 30 percent price drop this year. However, exports in fiscal 2014/15 were forecast to rise 13 percent to 720.7 million tonnes, BREE said, just below its previous estimate.
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