Tue, 11 Nov 07:26:00 GMT
* Export revenues to plummet despite rising volumes
* Iron ore and coal prices have both halved in value
* Government expecting a blow to its next budget
By Henning Gloystein and Manolo Serapio Jr
SINGAPORE, Nov 11 (Reuters) - A worldwide fall in iron ore and coal prices is set to cut Australia's overall export revenue by $32 billion, equal to 2 percent of projected GDP this year, Reuters calculations show.
Australia is by far the world's biggest exporter of iron ore and coal, commodities that helped it sidestep the worst of the financial crisis.
But with its next biggest resource exports gold, oil and gas also suffering price falls, as investors shun volatile commodities and China's economic slowdown persists, Australia risks an even harder ride next year.
The drop in commodity prices is also partly self-inflicted as Australia's largest iron ore miners BHP Billiton and Rio Tinto lift output by millions of tonnes each year after huge expansion programmes, creating a supply glut.
This has led to a 44 percent drop in iron prices so far this year to near the weakest since 2009 of under $76 a tonne and analysts say there is further to fall as supply increasingly outstrips demand. [IRONORE/]
"The party's over for iron ore," said Mark Pervan, head of commodity research at ANZ Bank, which this week cut its 2015 forecast to $78 a tonne from $101. [ID:nL3N0T02K7]
That's still higher than Citigroup's forecast of $65 a tonne.
Despite record iron ore exports, up from around 465 million tonnes to more than 650 million tonnes a year since 2011, the price plunge would mean a $17 billion fall in the value of iron ore shipments in 2014, Reuters calculations based on company, government and pricing data show.
Considering a similar deterioration in coal markets, this figure rises to $32.5 billion.
Australian Treasurer Joe Hockey has warned that lower commodity prices will hurt efforts to rein in a looming budget deficit, but the picture will become clearer when the government issues its mid-financial year fiscal outlook in December.
The deficit is already forecast at around A$50 billion ($43 billion) for 2013-2014, equivalent to 3 percent of GDP.
CHART-Ore vols, prices, revs: http://link.reuters.com/ceb43w
CHART-Iron ore, coal revenue: http://link.reuters.com/byx33w
CHART-Iron ore prices: http://link.reuters.com/gyx33w
CHART-Coal prices: http://link.reuters.com/tuv33w
Some of the fall in mining exports will be cushioned by a weakening Australian currency, which has lost more than 8 percent against the U.S. dollar since September. But with iron ore and coal prices having both more than halved since 2011, the jump in export volumes can only partially offset lower prices.
Falling iron ore prices are also squeezing margins of smaller Australian producers, which do not enjoy the economies of scale of the mega miners. But even if this part of the market was suspended, it would account for only about 20 million tonnes of annual exports, less than 3 percent of Australia's forecast 768 million tonnes next year, according to government data.
"The weak price environment for steel and steel making raw materials lingers on and at this stage, the bell tolls for those ferrous companies positioned high on the cost curve," ABN Amro said in its current Quarterly Commodity Outlook.
In coal markets, Asian prices could fall further as miners have kept output at high levels despite a slump in demand. [ID:nL4N0ST28H]
Australian thermal coal prices hit five-year lows of $62 per tonne at the end of October. [ID:nL4N0ST28H]
(1 US dollar = 1.1609 Australian dollar)
(Additional reporting by James Regan in SYDNEY; Editing by Ed Davies)