Australia cuts commodity sales forecasts

Australia has had to reduce its iron ore output for the period to July 2009 by 15 percent as the steel market has fallen, although metallurgical coal and copper production cuts have not been so drastic.

Production cuts across the mining world has lead to the collapse in global commodity prices, although the fall in the Australian dollar has meant that this has hedged the blow for companies such as Rio Tinto Ltd.

The fall in iron ore production has meant that Australian production is also likely to be cut, as there have been closures already within the country. The Australian Bureau of Agricultural and Resource Economics has reduced its forecast for refined copper output by 4 percent to 508,000 tonnes and by 10 percent to 924,000 tonnes for mined copper.

According to Gerard Burg, minerals and energy economist at National Australia Bank Ltd, China is going to be an important player in the recovery.

Burg expects a modest recovery at the beginning of 2009 although this is of course dependent on the resurgence of the manufacturing and construction industries, as well as the investment in infrastructure.

Australia’s exports of minerals and energy are forecast at AUS$159 billion and that figure is still 37 percent higher than 2008, so this particular industry is only just beginning to feel the affects of the global economic downturn.

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