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Demand slump hits home

WA commodity exports stalled in 2001 as the industry combats a dramatic slump in mineral and energy demand in Europe, the USA and Japan and puts a cloud over the Government’s ability to meet budgetary targets.

Resource sector sales grew only four per cent during the calender year, confirming forecast reports in Business News last week.

The decline, revealed in advance-release statistics from the Department of Mineral and Petroleum Resources, follows a record 51 per cent jump in the previous year which was achieved on the back of a global oil price hike.

Despite record crude oil and liquefied natural gas production levels, the total value of petroleum sales remained static at just under $10 billion. Crude oil sales rose 5 per cent with approximately 91 million barrels of crude oil sold, but were under-mined by an average 16 per cent lower oil price to just over $US23 a barrel. The Australian Bureau of Agricultural and Resource Economics is fore-casting a further 18 per cent fall to $US19 a barrel during 2002.

In its Mid-Year Financial Projections Statements released in December, the WA Government was banking on oil prices remaining at an average of $US20 per barrel to achieve its revised expected operating surplus of $9.6 million.

Annual petroleum royalty estimates, including North West Shelf petroleum royalties, vary by around $19 million for each $US1 difference in the price of a barrel of oil.

The commissioning of the North West Shelf $2.4 billion LNG fourth train expansion in 2004 is likely to offset any further deterioration in oil prices.

This week the joint venture partners announced a second LNG supply deal had been struck with Osaka Gas Co, which has committed to buying one million tonnes a year which, over 30 years, will be worth an estimated $8 billion. This follows an earlier deal in October with Tokyo Gas and Toho Gas agreeing to take 1.37 mill-ion tonnes of LNG a year.

Weak prices in 2001 also decreased nickel, diamond and gold export revenue, not with-standing the devaluation of the Australian dollar.

Keeping the resource sector in the clear, however, were strong alumina and iron ore sales. Iron ore sales volumes increased almost 20 per cent to $5.2 billion while alumina output rose to a record 10.8 million tonnes as BHP Billiton’s 1.25-million-tonne-a-year expanded product-ion facility at Worsley reached maximum capacity. Higher prices received by local producers was also responsible for the value of production soaring almost 20 per cent to hit a record $3.8 billion.

Iron ore exports are likely to strengthen further with BHP Billiton recently approving a $27.8 million high-value lump pisolite project at its Yandi mine in the Pilbara, while efforts to develop its Mining Area C deposit and expand its Port Hedland facilities were also advancing.

The $800 million West Angelas Robe River Iron Associates project, the Paraburdoo Eastern ranges expansion by Hamersley Iron and the Shanghai Baosteel Group, and the $1.4 billion Hope Downs project also place the industry on a strong footing.

The ABARE Australian Commodities March quarter outlook report tips that alumina export volumes in 2001-02 are forecast to increase 3.6 per cent to 13.18 million tonnes as the industry benefits from the closure of United States refineries, including Alcoa’s Point Comfort and St Croix refineries. However, depressed prices for alumina are forecast to result in export returns declining 7.4 per cent to $4.18 billion for the year.

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