Commodity price party ending: Access
October 27, 2005 - 5:34AM
www.smh.com.au
Australia's commodity export party is set to come to an end with a new report predicting major falls in prices for iron ore and coal.
Access Economics, in its latest minerals monitor, said a combination of slowing growth in developed nations plus an increase in supply was about to hit the Australian commodities sector.
The forecasting firm believes just three major commodities - all mineral sands - will enjoy price rises between now and early 2008.
Over the same period, it believes copper prices will fall 38 per cent, cobalt will drop 33.2 per cent and nickel will shed 32.4 per cent.
Access believes that of the big commodity exports that have underpinned the economy in recent months, coking coal prices will slip 18.6 per cent, steaming coal prices will dip 17.9 per cent and lump iron ore will drop three per cent.
The forecaster also believes oil prices will drop 26.5 per cent, but it has sharply revised up by almost $US5 a barrel the expected price of oil.
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Access said when prices start to fall, probably in 2007, the decline would be swift.
"Growth may be weakening in the developed nations, but the pace of growth in the (rather more resource-intensive) emerging nations such as China remains rampant," it said.
"That means the wind beneath the wings of industrial commodity prices is still blowing.
"How long can that last? Until global mine supply poops the party.
"Big slabs of supply growth are coming fast, especially in iron ore, but also in aluminium, copper and coking coal, while supply gains are also expected in nickel, oil, gas and thermal coal."
Access said the combination of high oil prices, the large US current account and budget deficits was incompatible with smooth and continuing global growth at above trend rates.
It warned that capacity in many economies was being neared, meaning inflation risks were also on the rise.
"Global growth is past its peak, and global risks are on the rise," it said.
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