Australia's resources agency slashed its mining export forecasts Tuesday as China's slowdown hits commodity prices, with earnings set to fall for the first time since the financial crisis.
The Bureau of Resources and Energy Economics scaled back its export earnings forecast for the year to June 30, 2013 to Aus$189 billion (US$198 billion), 10 percent lower than guidance given in June and a fall of two percent from the previous year.
It is the first fall in forecast earnings since the global downturn and reflected a slowdown in key market China where economic growth and exports had sagged, and ongoing worries in Europe and the United States, BREE said.
"China's economy will grow rapidly in 2012, but faces substantial downward pressures, especially in terms of its exports," BREE said in its quarterly energy and resources update.
"China's exports are still growing, but at a very much reduced rate compared to one year ago."
BREE said total resources production was expected to grow by eight percent in 2012-13 as the booming LNG sector kicked into gear, but total earnings would be two percent lower due to the drop in commodity prices and increased supply.
"While some commodity prices are forecast to recover later in the financial year, they are expected to remain well below the historically high prices seen in 2011," the bureau said.
Metallurgical coal and iron ore -- key ingredients for China's steel furnaces -- were expected to see the biggest falls in export earnings, down 15 percent to Aus$26 billion and 16 percent to Aus$53 billion respectively.
World prices for the critical steelmaking materials were expected to drop by 27-28 percent in the year to June 30, BREE said.
Steel consumption was seen as relatively flat for the 2012 calendar year, up two percent, with production set to increase by one percent in the 12 months to December 31.
The commodities slowdown has seen a number of major miners including BHP Billiton, Xstrata and Fortescue Metals sack workers and scale back Australian projects as their earnings decline.
Resources Minister Martin Ferguson said the report supported the government's view that the prices boom had passed and warned the industry to tighten its belt if it wanted to remain globally competitive.
"If resource prices continue to fall and input costs continue to rise, increasing productivity in this manner will be the only way the industry will continue to prosper," Ferguson said.
The heady days of sky-high resources prices had seen the sector grow "a bit lax", and Ferguson said he could not rule out "further mine closures on the east coast of Australia" without more efficient work practices.
More than half of Australia's copper, coal and nickel mines now have costs above global averages, according to the mining lobby which released a report this week warning of labour shortages and the impact of the strong dollar.
Mining-powered Australia has cooled as a result of the commodity price slump, with the pace of growth halving in the three months to June to 0.6 percent. The central bank has warned the mining boom will peak by 2014.