Commodities Price Projections Affected by Russia and China

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Global challenges such as the Ukraine War and China’s stringent COVID-zero policy have continuously affected vital mining and energy raw materials, affecting the government’s budget forecasts.

Russia is the key supplier of coking coal, coal used for making steel, and thermal coal used for energy and oil. But with the recent war with Ukraine, these commodities have been subject to restrictions and sanctions, and ultimately, prices for these significantly increased.

Australian mining and energy companies significantly benefited from these price surges, which increased tax revenues.

“We think the disruption to Russian coking coal exports will take years to replace fully, helping keep a premium entrenched in prices over the Budget’s outlook period,” notes the Commonwealth Bank of Australia’s (CBA) Economics team.

The Budget released last October 25 assumed that coal and oil prices would start to normalise by the first quarter of 2023. This assumption suggests that the coking coal price will drop to US$130 per tonne from US$271, thermal coal will drop to US$60 per tonne from US$438, and oil is expected to drop to US$100 per barrel.

The weakening growth outlook of China due to its COVID-zero policy affected the prices of iron ore. The government’s assumption for the iron ore price will drop to US$55 per tonne. 

“We broadly expect iron ore prices to bottom in Q1 2023 as China’s COVID-zero policy continues to weigh on demand,” as noted by the CBA team, led by chief Economist Stephen Halmarick, in its budget update.

Halmarick and his team further stated that the Budget’s forecast “for Australia’s key mining and energy commodities in the coming years is broadly too conservative.” 

He further says that the difference between his team’s forecast compared to the Budget’s is the timing of when the prices are expected to normalise. While the Budget assumes normalisation by Q1 2023, Halmarick predicts it will take longer.


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