The Australian Bureau of Agricultural and Resource Economics (ABARE) expects the higher value of the Australian dollar and weak spot prices to have a grave impact on Australian produces, resulting in lower returns in the short term.

This will be combined with the increased competitiveness of China, Indonesia and Russia which have shorter transport distances to key import markets.

Australia's chief commodity forecaster said over the medium term, changes in China’s coal exports would be a key driver in determining prices and market share in coal supply. Output is expected to rise slightly from an estimated 37.6% in 2003 to 38.3% in 2008.

Australian coal export earnings were predicted to shrink in real terms from $11 829 million in 2003 to a forecasted earning in 2004 of $10 439 million.

Despite current increases in Japanese exports, the long term outlook is downcast, with policy changes in Japan appearing to dampen coal consumption. ABARE predict the Japanese energy tax set to be enforced in October this year will result in Australian exports falling by around four million tonnes in 2008.

ABARE predicted the higher Australian dollar would result in the average unit value of thermal coal exports falling by 9% to $41 a tonne in 2003-04.

Thermal coal spot price is expected to rise toward the end of 2003 as utilities increase their stocks ahead of the northern hemisphere winter. By the end of the year the price is forecast to increase to around US$26 a tonne.

In the metallurgical coal market ABARE predicted demand to grow at an average rate of one percent a year to reach 208 million tonnes in 2008. Increased demand was expected to be sourced from India and North Asia, excluding Japan.

ABARE anticipated Australian hard coking coal exporters were likely to face increased competition from the Fording Trust in Canada. The company was formed from the merger of Fording, Teck Cominico and Sherritt International coking coal assets, resulting in operational efficiencies which lower production costs and enable them to be more competitive in Asian markets.

In 2002-03 and 2003-04, export values are forecast to be 9% and 11% lower at $7.3 billion and $6.5 billion respectively, despite marginally higher volumes shipped in each year.