Praveen Menon and Sonali Paul

MELBOURNE/WELLINGTON – Phones ring in Australia, as buyers look for supply of gas, coal and wheat. But local producers face infrastructural, labour and other obstacles.

Supply shortages for coal, LNG (coal, liquefied) are imminent due to the disruption of shipping in the Black Sea as well U.S. sanctions against Russian oil and sanctions on Russian banks that hit trade finance.

Prices for wheat, coal, and LNG have reached record levels. Russia and Ukraine account together about 30% of world’s global wheat trade. Russia is also the third-largest importer of power-generation coal, and the fourth-largest LNG exporter.

Australian commodity exporters eye up profitable trade potential as global prices spike https://fingfx.thomsonreuters.com/gfx/ce/lbvgnzyympq/AustraliavsWorldCommodityPrices.png

Australia will be the sixth biggest exporter of wheat this year. But, Australia’s trucking and rail infrastructure will not allow it to fulfill its supply requirements in the immediate future.

Following a second year of record wheat yields, the majority of shipping slots have been booked for the eastern and western coasts. The result has kept Australian wheat prices in check relative to Chicago Board of Trade.

Dennis Voznesenski (Rabobank agricultural analyst) stated that the current economic situation in his country is not conducive to a quick recovery.

His statement said that Asian buyers, who usually place their orders one month in advance, are tapping Australia merchants to purchase grain for June and July. They would normally rely upon supplies from the Black Sea.

“Everyone is pretty much scrambling right now,” stated Graeme Cooney founder of Mobile Conveying Services which provides mobile loaders to the grain and coal industries.

He is being contacted by coal miners and wheat growers. They need loaders to transport their goods to the ports as soon as possible. But there’s a scarcity of equipment.

Due to a worldwide shipping crisis, loader acquisitions from abroad have taken up 12-13 months due to the extended lead time.

Cooney declared, “So yes, there’s a bottleneck now.”

Riordan Grains, a trucking company, stated that even though it could buy additional trucks in order to deal with the crop of bumper crops there were no available drivers.

Jim Riordan, managing director, said, “We all know the high unemployment rates. Therefore, it’s almost impossible to find more people in Australia to perform additional work, even if there were more ports.”

CONTRACTS RESERVED

Over the last two weeks, coal producers have also been subject to calls from Poland and other countries for supplies.

A spokesperson for New Hope Corp stated that the high-quality coals of New Hope (OTC) Group are highly sought after in current markets. However, they are looking at European market opportunities.

Australia export volumes & value of coal, LNG, wheat and nickel https://fingfx.thomsonreuters.com/gfx/ce/zdvxokggdpx/AuscoalLNgnickelWheatExports.png

Australia’s LNG and coking coal producers are able to sell their bulk in term contracts so that they can not divert supply from these customers.

Australian miners are in dire straits. Glyn lawcock, Barrenjoey analyst said there will be an increase in exports and production of coal once the dry weather on Australia’s east coast subsides.

Although they will not be able increase their output, the coal producers can still reap the rewards of rising prices.

According to the December quarter outlook by the government, Australia’s thermal coal exports were forecast to rise from 192m tons a year prior to the Ukraine conflict to 208m tonnes in 2022. But, this value will more than double to A$35Billion ($26 Billion).

The fact that there’s no additional gas for producers of LNG means they can’t increase their output. LNG exports will likely be lower or flat than last year’s 80.6 million tonnes record, which placed Australia at the top of the list for largest LNG exporter in the world.

As the nation’s founding gas fields run dry, production at two of its oldest LNG projects, North West Shelf LNG (Darwin LNG), is declining.

Shell (LON) has announced that the Prelude floating LNG facility is offline. This happened after a huge power cut in December. Shell did not give a timeline for the restart of the facility which can produce 3.6m tonnes annually.

Woodside (OTC) Petroleum is the operator of Australia’s two LNG plants. It said that most of its cargoes uncommitted will be shipped to Asia as there are not enough products in Asia.

The government has forecasted that Australia’s LNG exports to 2022 will increase by more than doubling to A$63Billion, due to high oil-linked contracts prices.

Value of Australian coal, LNG, wheat and nickel exports since 2005 https://fingfx.thomsonreuters.com/gfx/ce/gkvlgakkmpb/AustCoalLNGWheatNickelExportssince2005.png

Nickel might be an exception due to the unprecedented price increase. Australia’s exports could increase 42% to 257,000 tonnes by June 2022, as compared with a year prior. This is valued at A$5.2 Billion.