BATT - Australia On Track To Earn As Much For Lithium As Thermal Coal
2023-04-18 01:10:00 ET
Summary
- Australia is on the brink of a significant accomplishment in the worldwide transition from fossil fuels to renewable energy sources.
- Within the next five years, the country projects it will generate as much revenue from exporting lithium, a crucial mineral in battery technology, as it presently does from thermal coal.
- This news is even more surprising considering most analysts project lithium prices will fall dramatically in the coming years.
By Sohrab Darabshaw
Australia is on the brink of a significant accomplishment in the worldwide transition from fossil fuels to renewable energy sources. Within the next five years, the country projects it will generate as much revenue from exporting lithium, a crucial mineral in battery technology, as it presently does from thermal coal. This news is even more surprising considering most analysts project lithium prices will fall dramatically in the coming years.
Much of the relevant data comes from the office of the Chief Economist in the Department of Industry, Science, and Resources. In its latest quarterly forecast of resources export revenue, the Department said that the demand for and the production of the country’s lithium remains poised to grow exponentially. Indeed, by 2028, the country’s production of lithium carbonate equivalent will double 2022 levels.
Moreover, Australia’s commodity forecasting agency has projected a record A$348 billion ($255 billion USD) in export earnings for the ongoing fiscal year. These results found themselves driven primarily by an upsurge in the export of new energy metals like lithium, nickel, copper, and zinc.
However, analysts do not expect this growth to remain sustainable. According to the 2027-28 fiscal year forecast, earnings will reach an estimated A$335.9 billion. This signifies a yearly decline of 3.7%. Currently, analysts blame the drop on moderating prices due to the sluggish global economy and increased global supply of vital commodities.
China Remains a Major Importer of Aussie Lithium
Australia today sits in a “happy place” on the export road. Exports of thermal coal, which is used to generate power, are expected to reach 195 million tons ((MT)) in 2027-28. This is an increase from the 182 million projected for the current year.
That said, the price forecasts predict a slide to $103 a ton from the current $313. Coking coal shipments, however, are expected to rise to 172 MT from 164 MT. Again, the prices forecasts predict a drop to $185 a ton from $296.
According to reports , analysts expect lithium export revenue to grow. However, they also anticipate the export value of other resources, such as thermal coal, iron ore, liquefied natural gas, coal, and oil, will decline over the same period. Many will recall that China enforced an unofficial boycott of Australian coal.
The move was a retaliation against Canberra’s call for an investigation into COVID-19’s origins in 2020. However, even at that time, it had not boycotted Australian lithium. Indeed, it was already too dependent on a steady supply of the mineral, which it used to help build up Chinese dominance in EV and battery technology.
As of 2022, some 96% of Australia’s lithium exports went to China, according to the industry department’s report. Of course, China needs all that lithium. In fact, the country currently accounts for 58% of global lithium processing capacity and nearly 80% of global lithium battery manufacturing capacity. So regardless of where lithium prices go, China will likely continue to buy.
Lithium Prices Projected to Drop Alongside Other Exports
Australia is the world’s largest exporter of iron ore, coking coal, liquefied natural gas ((LNG)), and lithium. Meanwhile, it ranks second in thermal coal and third in gold, copper ores, and concentrates. However, as stated earlier, by the 2027-28 fiscal year, earnings from commodities will drop to A$335.9 billion. This represents a compound annual decline of 3.7% from the current year.
The government still expects Australia to export rising volumes of new energy metals, including lithium, nickel, copper, and zinc. However, it also anticipates that the prices for most of these metals to decline over the forecast period.
For instance, projections indicate that lithium export volumes will rise to 4,462 tons by 2027-28, up from 3,080 in 2022-23. However, lithium prices are slated to fall to $2,700 a ton from $4,104 in the current fiscal year. Likewise, nickel exports should grow to 215,000 tons by 2027-28 from 164,000 in the current year. Meanwhile, the price will drop to $21,313 a ton from $24,414.
Iron Ore and LNG
Exports of liquefied natural gas ((LNG)) should remain largely steady, with 80 million tons projected in 2027-28. This represents only a slight change from the 82 million exported in 2022-23. But again, experts anticipate the price to drop to A$13 a gigajoule from A$21 in the current fiscal year.
Iron ore, the country’s most valuable commodity export, is also expected to go low where prices are concerned. Currently, the forecast predicts prices to reach $69 a ton in 2027-28, down from the current $97.
But according to this Reuters report, Australia has dealt a blow to global climate change objectives despite anticipating an increase in the export of new energy metals. This is mainly due to the estimated volumes of fossil fuels, including coal and natural gas, in its future shipments.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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Australia On Track To Earn As Much For Lithium As Thermal Coal