"New normal" is a term coined about China’s transition to slower but hopefully more sustainable economic growth, but it can be equally applied to many commodity markets. This reality was well illustrated by the Australian government’s latest set of forecasts for the country’s commodity exports, which highlighted we are now in an era of low prices but strong volumes. Australia’s official forecasts carry weight because the country is the world’s largest exporter of iron ore and metallurgical coal, and will become number one in liquefied natural gas (LNG) within the next few years. The big picture is that Australia is receiving less money for its commodity exports, with the value dropping 11 per cent to A$174 billion (US$133.8 billion) in the 2014-15 fiscal year from the same period a year earlier, the Department of Industry and Science said in its latest quarterly outlook published June 30. However, the news isn’t all bad, with export earnings forecast to rise to $178 billion in 2015-16. But as usual, the devil is in the detail and the only reason Australia can expect even that modest increase in commodity export earnings is because of the ramp-up of shipments of LNG. The department forecast that LNG exports will rise 49 per cent to 38.1 million tonnes in 2015-16 as more of the seven plants under construction move into full production. This will drive a 36.4 per cent increase in the value of LNG exports to A$24.416 billion. But since a gain of nearly half in exports translates into only a rise of just more than a third in revenue, the impact of lower prices can be seen in the department’s forecasts. Converting LNG from tonnes into million British thermal units (mmBtu) shows that the department estimated that Australia received A$14.59 per mmBtu in 2014-15 and will get A$13.32 in 2015-16. In US dollar terms at the current exchange rate, this translates into $11.21 for the last fiscal year and $10.24 for the year that started Wednesday. While many LNG producers have multi-year term contracts linked to oil prices, it’s worth noting that the current spot price of LNG in Asia is just $7.30 per mmBtu. While the forecast for LNG prices may be slightly optimistic, the department has scaled back its expectations for Australia’s other major commodity exports. Iron ore is expected to average $52.10 a tonne in 2015-16, down from $54.40 in 2014-15 and well below the current spot price of $59.30. Australia’s exports of the steel-making ingredient will rise 8.4 per cent in 2015-16 to 795 million tonnes, the department forecast, but revenue will drop 3.9 per cent to A$52.2 billion. While iron ore remains the country’s top export in value terms, the price slump in recent years has been dramatic, with export earnings of A$74.67 billion in 2013-14 some 43 per cent higher than those expected in the current fiscal year. This dynamic illustrates the affect of miners boosting production well beyond what the market could absorb. The Australian government is also considerably more pessimistic than its major iron ore miners, Rio Tinto and BHP Billiton, over the outlook for China’s steel sector. While both companies have maintained that Chinese steel production will rise to somewhere around 1 billion tonnes in the coming decade, the government appears to be siding with the Chinese steel industry in suggesting output has already peaked. It expects Chinese output to be 810 million tonnes in 2015, down from 823 million in 2014, with a further drop to 802 million pencilled in for 2016. Coal exports are expected to hold up, even in the face of declining imports by China, with metallurgical coal shipments expected to rise 3 per cent to 191.4 million tonnes in 2015-16 and thermal coal by 0.4 per cent to 201.7 million tonnes. If these forecasts turn out to be accurate, it’s likely that Australia will once again reclaim the title of world’s top coal exporter from Indonesia. But getting the crown back comes with the caveat of lower prices, with metallurgical coal expected to average $103 a tonne in 2015-16, down from $103.60 in 2014-15, while thermal coal will average $62 in 2015-16, lower than last fiscal year’s $68. The metallurgical coal forecast may be slightly optimistic given the current spot price of around $88.40 a tonne, while the thermal price forecast shows little improvement is expected from the current Newcastle index price of $61.66. What the official forecasts show is that miners and energy companies have invested massive amounts of cash to boost output, only to receive vastly lower prices for their products.