01/10/2009 - 00:00

Export figures defy gloomy expectations

01/10/2009 - 00:00


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Western Australia’s exporters have defied the global downturn to deliver another record performance in 2008-09. So who are the key players behind the numbers?

Export figures defy gloomy expectations

WESTERN Australia, like the rest of the world, has been hit hard by the worst downturn since the Great Depression.

Exporters of key commodities, notably iron ore and nickel, immediately felt the rapid meltdown in global equity markets as Chinese demand slowed and prices plummeted.

The immediate result was the deferral of several major mine expansions and the closure of several mines, most notably BHP Billiton's Ravensthorpe nickel mine in WA's south.

Consequently, more than 9,600 workers in the mining industry were bundled out of work between October and June.

Yet the statistics indicate that the state's exporters have largely defied the downturn to consolidate WA's standing as the economic engine room of the nation.

According to official figures from the state government and Australian Bureau of Statistics, exports from WA jumped more than 26 per cent in the 2009 financial year, climbing $18 billion to a staggering $86.8 billion.

Despite accounting for only about 10 per cent of the country's total population, WA now generates 38 per cent of Australia's total exports.

That dwarfs the 24 per cent share generated by the state's nearest rival, Queensland, is more than double the 17 per cent share generated by the third biggest export-earning state, New South Wales, and is more than four times the 9 per cent share provided by Victoria.

Resources lead

Resources exports continue to be the main driver of the state's export performance.

According to the Department of Mines and Petroleum, resources sector exports topped $77.5 billion in the year to June 30, a number which itself exceeded Queensland's total export numbers by more than $20 billion.

And perhaps surprisingly, given that the downturn was felt most immediately in the Pilbara, iron ore was the standout performer in terms of dollars generated.

WA's iron ore miners produced a record 316 million tonnes of ore in 2008-09, 8.5 per cent more than in the previous year.

When combined with the twin effects of a weaker Australian dollar and higher average prices over the year, the value of iron ore exports jumped more than 52 per cent to $33.5 billion for the year.

WA's oil and gas industry reported a 9 per cent lift in exports to $21.3 billion, although the gain was entirely due to increased LNG exports following the commissioning of the fifth production train at the Woodside-operated North West Shelf.

While LNG sales jumped 67 per cent to $8.54 billion, non-LNG exports fell 13.3 per cent to $11.5 billion, reflecting natural field decline at several key oil and condensate operations, and lower oil prices over the period.

Mining and energy giant BHP Billiton was by far and away the single biggest exporter, with total export revenue from its WA iron ore, oil and gas, nickel and alumina operations of more than $17.8 billion.

BHP's iron ore business alone ranked as the state's sixth largest exporter, with total exports of $11.9 billion, $2.1 billion more than in 2007-8. As a one-sixth owner of the North West Shelf project, BHP also benefited from the increase in LNG sales.

However, the impact of the downturn could also be seen in the modest $100 million rise in BHP's total WA export revenue due to the weaker performance of its nickel and alumina operations.

Due to the collapse in nickel prices and the closure of Ravensthorpe, exports from BHP's Nickel West business fell almost 60 per cent to $1.4 billion, pushing Nickel West from fifth to 10th on the list of the state's biggest exporters.

Similarly, weaker alumina prices led to a fall of $360 million in sales by BHP's 86 per cent-owned Worsley Alumina, to $1.28 billion.

The numbers again confirmed WA's status as the headquarters of the nation's gold industry. While the state accounts for about 60 per cent of national gold mine output, it is also the main refining centre for the region. Virtually all Australia's gold production is refined in Perth, along with output from Papua New Guinea and most of South-East Asia.

Consequently, while WA primary gold sales jumped by a quarter to $5.2 billion, WA's total gold exports - including the re-export of gold brought into the state for refining - jumped 40 per cent to $16.8 billion.

That ensured refiner AGR Matthey, 40 per cent owned by the WA government's Gold Corporation, was again the state's second biggest exporter on a standalone basis with total exports of $16.5 billion, $5.46 billion more than the previous year.

Third on the list was the Woodside-operated North West Shelf, with total export revenues of $14.35 billion, up by $1.6 billion over the previous year due to due to increased LNG exports.

BHP's chief mining rival, Rio Tinto, ranked fourth on the list of WA exporters with total exports of iron ore, talc, salt and diamonds totalling more than $14.2 billion, almost double the $7.9 billion achieved the year before.

However, that was almost entirely due to the performance of Rio Tinto Iron Ore, which alone ranked as the state's fifth largest exporter with total exports of $14.1 billion.

Woodside Petroleum ranked next on the list at sixth, with total exports for the year of $5.1 billion, up $1.82 billion from the previous year. While its share of export revenue from the North West Shelf totalled $2.93 billion (it has a greater share of non-LNG production), it also generated $2.16 billion in exports from its other WA oil and condensate projects, such as the Enfield and Vincent oil projects off the Pilbara coast.

US aluminium giant Alcoa ranked seventh on the list, with sales from its WA alumina refineries almost unchanged from the prior year at $3.28 billion.

Grains boost farms

While the resources sector continues to garner most attention, WA's agriculture sector remains a key contributor to the nation's economy. Agricultural exports totalled more than $5.45 billion in 2008-09, underpinned by a 52 per cent rise in wheat exports to $2.75 billion and an 88 per cent rise in canola exports to $535 million.

Consequently, CBH-controlled grain exporter Grain Pool joined the ranks of the state's top 10 exporters in eighth position. When it closes its accounts for the 2008-09 year ending October 31, Grain Pool expects to book total grain exports of $2.4 billion, up from $1.7 billion in 2007-08.

Andrew Forrest-led Fortescue Metals Group was the only other newcomer to the state's top 10 exporters with total iron ore exports of $1.85 billion for the year, reflecting the first full year of production from its Pilbara iron ore operations.

Tough times loom

Despite the solid performance of the state during a difficult 2008-09, WA's exporters face a tougher test this financial year.

While key commodity markets and business confidence are showing signs of recovery, lower prices for key commodities such as iron ore will have a major impact on the state's trade numbers.

Similarly, exporters are facing additional pressure from the significant appreciation in the Australian dollar, with some economists predicting it will reach parity with the US dollar early next year.

When the state government released its annual report on state finances last month, it revealed government revenue had grown only 0.5 per cent in 2008-09, well below its revised December estimate of 3.6 per cent due to the more severe than expected impact of the downturn.

That does not bode well for the government's December projection that a weaker Australian dollar would offset further weakness by adding more than $1.6 billion to government revenue in 2009-10, an assumption that now looks increasingly doubtful.


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