* Australia lifts most 09/10 commodity output forecasts
* Thermal coal, iron ore lead ABARE's growth forecasts
* Miners count on China to buy more minerals to fuel growth
* Export earnings down due to contract price falls (Adds more details, quotes)
SYDNEY, Sept 22 - Returning demand from China and rising output will boost the volume of Australia's exports of industrial minerals in the year to June 2010, especially iron ore and thermal coal, a government forecaster said on Tuesday.
The forecast for exports of iron ore -- Australia sits on the world's single largest deposit -- was upped 12.6 percent as miners dig deeper and faster on the promise of a ready market in China for years to come.
"The best indicator for Australia is to look into the higher import figures for China," said Mark Pervan, senior commodities strategist for Australia & New Zealand Bank. "The bulk of the iron ore and thermal coal will go to China, no doubt about it."
The Australian Bureau of Agricultural and Resource Economics (ABARE) now expects iron exports to zoom to 381 million tonnes this year, well above last year's bumper 323.3 million tonnes.
Australia's three largest iron ore miners, Rio Tinto, BHP Billiton and Fortescue Metals Group, are spending billions of dollars to raise iron ore production in Australia's west, all of it earmarked for export to Chinese steel mills and accounting for much of the growth in ABARE estimates.
A legion of smaller-sized miners has also cropped up in the last year, forming alliances with Chinese customers and each other to dig mines and build port facilities.
Australian production of iron ore increased by 23 percent in the quarter ended June 30 compared with the previous quarter and will continue to expand, ABARE said.
Likewise big gains are forecast for thermal coal, long a staple export to Japan but increasingly prized in China for coal-fired power generation.
For now China is almost singlehandedly leading the resurgence in world commodities markets, drawing raw materials from countries such as Australia, whose mineral wealth and sparse population make it an ideal supplier to China's rapid industrial growth.
"In today's world, China is the metals market," said Allan Trench, manager of commodities researchers CRU International. But while upping its forecasts in its latest quarterly review, ABARE again cut its earnings estimate from minerals exports -- by about A$1 billion ($862.8 million) -- citing lower selling prices, dousing hopes of a return to the record high prices of early 2008 before the global financial crisis.
"For energy and minerals, export earnings are forecast to fall by 23 percent to A$123 billion in 2009/10, mainly a result of lower contract prices for bulk commodities, including coal and iron ore," ABARE's deputy executive director Terry Sheales said in a statement.
Contract iron ore prices are 33 percent below last year and thermal coal is off 44 percent.
The biggest upward revisions from the June outlook was 14.2 percent for exports of thermal coal.
Much of the recovery is pinned on expectations that China, the world's largest importer of iron ore and copper concentrate and a big consumer of almost every other mineral, will remain a fervent buyer of Australia's commodities.
Prices of base metals have galloped higher this year on the promise of lasting demand in China. Copper has more than doubled to more than $6,000 a tonne, zinc is up 65 percent and nickel is up 80 percent. But they are all still well below last year's record highs.
China bought record monthly tonnages of commodities earlier this year, after a brief hiatus during the depths of the global financial malaise, setting the stage for mine expansions in Australia.
But import figures alone may not be an accurate sign of real demand in the world's fastest growing economy.
Sharply rising inventories in China suggest that real demand is not nearly as strong as official economic data imply, according to HSBC.
It notes that most inventories at Shanghai warehouses are up by an average 40 percent over the past three months, while steel and iron ore inventories stand at record highs.
A large proportion of commodities imported to China are simply being stored in the hands of brokers, or middlemen due to a lack of monetary liquidity, according to Fang Hao, executive director of investment banking for Citic Securities Co., China's biggest listed brokerage.
For a table of ABARE forecasts, click on ($1=1.159 Australian Dollar)
Source: Reuters
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