The Australian reported that demand for Australia’s key resources is still strengthening and the current weakness in prices will not be sustained.

The Bureau of Resources and Energy Economics expects iron ore prices will recover to a trading range of USD 90 per tonne to USD 95 per tonne over the next five years as China’s steel production rises from about 800 million tonnes now to reach 900 million tonnes to 950 million tonnes a year.

Mr Wayne Calder executive director of BREE is also confident about the outlook for the coal industry, with big increases in electricity generation capacity across Asia being based on coal fired power stations.

Mr Calder said that “Moves by China to restrict imports of low quality coal would have no significant impact on Australian exports. We export 194 million tonnes of thermal coal of which 47 million tonnes will be going into China. Little more than half the shipments to China could be affected and it was far from certain they would be. Miners could also take steps to raise the quality of the coal they ship.”

He said that “Australia had the potential to diversify its markets. India was bringing on 100 gigawatts of coal fired power, while China had 23 gigawatts under construction and another 49 giga watts planned. Vietnam, Thailand and a lot of other nations in Southeast Asia are increasing their demand for coal, producing more electricity to improve the welfare of their communities, so there is an upside for coal.”

Mr Calder acknowledged coalminers were facing challenges. Australian miners faced take or pay contracts with rail authorities trying to maximise their output in an effort to lower unit costs, but this was increasing the downward pressure on prices.

In the case of iron ore, Mr Calder emphasised that the volatility of the iron ore market since benchmark pricing was abolished in 2010, with price swings of 30% or more within the commodity’s natural cycle.

The market has been affected by the rapid ramp-up in supply, with 200 million tonnes of capacity coming on stream in Australia over the last 12 months. We still see demand growing, but it has slowed somewhat.