Base metals to bounce back in changing export mix
This will lift demand for gas and base metals - copper and nickel - from Australia, which will eclipse the demand growth expected for iron ore and coal, both of which are used in the first stage of industrialisation when the need for steel surges.
Australia's mining industry expertise will also drive orders for its industrial machinery from mining provinces in Asia, Latin America and Africa. This sector will emerge as the third prong in future export growth, after energy and base metals, a forecast from HSBC and Oxford Economics says.
Malaysia will emerge as one of Australia's biggest markets, surpassing the US to emerge as the No.5 destination for exports, trailing only China, Japan, Korea and India.
Commodity analysts have been tipping weakness in iron ore prices over the rest of the year amid slowing demand growth from China, which will flow on to coal prices and place renewed pressure on the earnings of mining companies.
"There will be a structural shift" in Australia's export profile, the head of commercial banking at HSBC Australia, James Hogan, said.
"Rather than focusing on steel manufacturing, there will be a shift towards the supply of materials for producing high-end consumer goods, so this will boost demand for copper and nickel, and also energy," he said.
"There will be a degree of volatility ... but the trend is clear."
The export focus on Asia will increase as sales to the US and the rest of the world decline.
Asia already accounts for more than 70 per cent of Australia's exports, up from about 50 per cent in 2000. HSBC and Oxford Economics expect this to top 80 per cent by the end of the decade.
"The trend will continue to 2030, with further concentration on Asia," Mr Hogan said.
This will be underscored by countries such as Vietnam, which will emerge as a significant new destination for Australian exports - forecast to grow by 8 per cent to 9 per cent a year over the next 15 years or so. This will put it ahead of the forecast growth in exports to China, where annual growth will slow to about 7 per cent a year between 2020 and 2030, from about 9 per cent at present.
Australia is already the sixth largest producer globally of copper, exporting about 2 million tonnes annually, with large mines at Mt Isa and Olympic Dam.
The nation has a dominant position in nickel and holds about one-third of the global reserves of the metal.
BHP Billiton is one of Australia's largest nickel producers with mines at Mt Keith and Leinster, along with refineries and smelters.
Frequently Asked Questions about this Article…
Research from HSBC and Oxford Economics forecasts a structural shift in Australia’s export mix away from steel-making commodities toward energy, gas and base metals such as copper and nickel, along with industrial machinery — driven by rising middle-class demand in Asia.
HSBC says growing demand for higher-end consumer goods and energy will boost copper and nickel demand. For investors, that could mean greater exposure and opportunity in base-metal producers, but the report also warns of a degree of volatility even as the long-term trend points higher.
Commodity analysts are tipping weakness in iron ore prices this year because of slower demand growth from China, which is likely to flow through to coal prices and could place renewed pressure on mining company earnings.
Asia will take an even larger share — already over 70% of exports and expected to top 80% by decade’s end. Malaysia is forecast to become Australia’s fifth-largest export destination (surpassing the US), and Vietnam is expected to see export growth of about 8–9% a year over the next 15 years.
Australia is the sixth-largest copper producer, exporting roughly 2 million tonnes annually with major mines like Mt Isa and Olympic Dam. The country also holds about one-third of global nickel reserves, giving it a dominant position in that metal.
The article names BHP Billiton as one of Australia’s largest nickel producers, operating mines at Mt Keith and Leinster and owning refineries and smelters.
HSBC and Oxford Economics expect Australian mining industry expertise to boost demand for its industrial machinery from mining provinces across Asia, Latin America and Africa, making machinery the third growth pillar after energy and base metals.
Investors should monitor base-metal demand (copper and nickel), gas and energy trends, iron ore and coal price movements, and shifting trade patterns into Asian markets like Malaysia and Vietnam. Also watch company exposure to these sectors and be mindful of short-term volatility versus the longer-term structural trend.
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