Canberra: Australia, the world’s biggest exporter of iron ore, cut its revenue forecasts for the key steel making ingredient by a fifth on Tuesday, a fresh sign the country’s mining industry is losing steam as a slowdown in top customer China drives down prices.

Resources exports shielded Australia from recession during the global financial crisis, thanks to on-going strong demand from China in particular as its population becomes wealthier and more urbanised.

But slowing Chinese growth and falling prices have led to concerns for Australia’s economy and prompted warnings that the mining industry’s ongoing expansion cannot be taken for granted.

The Bureau of Resources and Energy Economics (BREE) forecast revenue from iron ore, Australia’s largest single export, of A$53.2 billion ($55.9 billion, Dh205.26 billion) in this fiscal year, down from a June forecast of A$67 billion and around A$63 billion last year.

“Although this is not good news, it is by no means a death knell for the Australian resources industry,” Resources Minister Martin Ferguson told a mining and energy conference in Canberra.

“It is useful to remember that the commodity prices experienced since last year were record-breakers. And although it’s difficult to say when or if we might scale to those exceptional heights once more, BREE expects a rebound in some commodity prices in 2013, should global growth pick up as is expected by the International Monetary Fund.”

Analysts said the quarterly forecasts tended to be behind the curve but did not a see significant risk of further major falls in demand for Australian resources.

“The prices have certainly come down, so customers are asking for lower prices, but I think they still see [Australia] as a secure place to get supply,” said Mark Pervan, the head of commodities research for ANZ in Melbourne.

End of boom?

Australia has been counting on a healthy $270 billion committed pipeline of resource and energy projects to prolong its remarkable run of 21 years without a recession.

But with prices for iron ore, coal and other resources under pressure, a further $200-odd billion of projects proposed but not committed is looking increasingly unlikely.

Despite the revenue downgrade, miner Rio Tinto Ltd said it remained confident of demand in the long term, particularly from China, thanks to a new economic stimulus.

“We think that we’ll start to see some rebound in demand over coming months and into next year,” Rio Tinto Australia managing director David Peever told reporters.

“But the short term is very, very difficult.”

Ferguson last month warned Australia’s resources boom was over after BHP Billiton shelved plans for an expansion of its Olympic Dam copper and uranium mine, although he later rowed back on the comments to say commodity prices had peaked.

The world’s no.4 iron ore producer, Fortescue Metals Group , has also scaled back on expansion plans, while some high cost mines have begun closing and more may follow.

A “significant portion” of Australian coal miners were losing money at current prices, Xstrata said last week as it announced it was cutting production and hundreds of jobs.

Prolonged low prices for iron ore and coal could also hurt Australia’s economy and undermine the government’s hopes of returning its budget to a surplus by June 30, 2013, with lower resources earnings to impact on profits and tax revenue.

Australia’s central bank noted in the minutes from its last policy meeting that a sustained fall in export prices could hurt the terms of trade more than expected, but said it had scope to cut rates to respond to any major threat to growth.

LNG a bright spot

BREE forecast Australia’s total resources and energy exports would dip 2 per cent from record levels in 2011/12 to about A$190 billion, compared to its previous forecast of A$209 billion.

It sees iron ore exports in the year to June 30, 2013, of 509 million tonnes, little changed on its June forecast of 510 million tonnes and up 8 per cent on the previous year.

The government bureau said it expected contract prices for iron ore to be $126 per tonne through 2012 and $101 in 2013.

The price of iron ore {.IO62-CNI=SI} traded as high as $180 a tonne a year ago, but plummeted to a 3-year low of $86 earlier this month as demand in China fell before scrambling above $100.

BREE said metallurgical coal exports were set to ease slightly to 160 million tonnes, but revenues could fall 15 per cent to A$26 billion due to softer prices.

One bright spot was the forecasts for LNG exports, which are expected to rise 20 per cent from 2011/12 levels in volume and more than 35 per cent in value, driven by Asian demand.