SYDNEY, April 6 (Reuters) - Australia’s export earnings from mining and energy commodities were forecast on Friday to leap 32 percent to a record A$215 billion ($162 billion) in fiscal year 2017, reflecting recoveries in its most valuable exports - iron ore and coal.
Surprisingly higher prices for both commodities coupled with rising liquefied natural gas exports are likely to be the most significant contributors to growth in export earnings five years after Australia’s mining boom came to a halt, according to the Department of Industry, Innovation and Science.
Strong steel production in China has supported higher iron ore and metallurgical coal prices.
But the hikes are unlikely to last, the department said in its latest quarterly commodities update on Friday.
Steel output in China, the world’s biggest consumer of both commodities, should decline over the next five years as construction slows, particularly in the residential sector, it warned.
The strength in iron ore led the department to lift its 2017 iron ore forecast by 26 percent to $65.20 a tonne. But it also predicted the following five years would see prices average just $51.
Iron ore rose to a 30-month high of $89 a tonne in mid-February, defying most forecasts for prices to recoil. Iron ore averaged $79 in the first quarter, up 23 percent from the previous quarter and 75 percent year-on-year.
Iron ore .IO62-CNO=MB stood at $81.54 a tonne on Thursday, according to Metal Bulletin.
But swelling supply, mostly from Australia and Brazil, where Rio Tinto , BHP Billiton and Vale SA dominate output, should steadily outpace demand growth for the rest of 2017 and beyond, reducing the price, according to the department.
“China’s iron ore port stocks have steadily risen in the December and March quarters, to reach 130 million tonnes — the highest level on record,” it said.
The department also lifted its forecast for thermal coal contract prices in 2017 by 9 percent to $81 a tonne, citing limits in China on domestic mining to curb air pollution, but sees slippage to under $70 in the following five years.
The department’s 2017 price forecast of $193.80 a tonne for metallurgical coal, used to make steel, was made prior to the damage to Australian collieries last week caused by Cyclone Debbie.
Metallurgical coal jumped 8.5 percent on Wednesday in its biggest single-day spike since November after producers BHP and Glencore declared force majeure on deliveries due to flooded haulage rail lines. ($1 = 1.3264 Australian dollars) (Reporting by James Regan; Editing by Christian Schmollinger)