Jul 22 2020
Against the backdrop of the COVID-19 pandemic, IBISWorld has compiled a list of five industries expected to exhibit strong export revenue growth in 2020-21.
Industries expected to increase export revenue in this year include Nickel Ore Mining, Grain Growing, Footwear Manufacturing, Wood Chipping, Pharmaceutical Product Manufacturing and Grape Growing. Export revenue across these industries is expected to grow to $16.0 billion this year. In contrast, the total value of Australian merchandise exports is expected to decline by 3.9% in 2020-21, to $348.1 billion. The total mass of Australian exports by sea is expected to decline by 3.1% this year. The COVID-19 pandemic is anticipated to continue hindering international trade globally, as countries grapple with ongoing quarantine measures. However, economic conditions are expected to gradually normalise over the second half of 2020-21. This is expected to lead to a resurgence in demand for Australian exports, enabling a recovery in many industries that were severely disrupted in 2019-20.
Nickel Ore Mining
Export revenue in the Nickel Ore Mining industry is expected to rise by 26.2% in 2020-21, to total $522.4 million. Movement restrictions and social distancing requirements have had minimal impact on most mining operations. Although demand dropped in the first quarter of 2020 as the COVID-19 virus spread, the global market for nickel broadly rebounded following a recovery in Chinese production of stainless steel, which requires nickel. As at July 2020, global nickel prices on the London Metals Exchange have recovered most of the decline exhibited since January 2020.
Greater production and growing demand for steel in key consuming countries such as China are anticipated to lift demand for nickel during 2020-21, putting upward pressure on nickel prices. In local currency terms, nickel prices are expected to rise by 16.2% in 2020-21. Australian nickel exports are also expected to rise from 282 kilotonnes in 2019-20, to 333 kilotonnes in 2020-21. Greater output from BHP’s Nickel West project, as well as First Quantum Minerals’ Ravensthorpe mine in Western Australia is expected to drive nickel exports. The value of nickel exports, including unprocessed ores as well as refined metal products, is expected to total $5.9 billion in 2020-21.
Drought conditions across most of eastern Australia reduced national coarse grain production to a 13-year low of 10 million tonnes in 2019–20. The Grain Growing industry is expected to rebound in 2020-21, leading export revenue to increase by 23.2% to $6.8 billion. Improved rainfall conditions over late 2019-20 have led to a resurgence in barley planting, leading to an expected 17% increase in barley production in 2020–21. Despite the benefit of improved growing conditions, grain producers remain threatened by the barley import tariffs imposed by China in May 2020.
Australian grain exports reached a 10-year low in 2019-20, as producers were incentivised to sell into the domestic market. An oversupply of animal feed in foreign markets, in conjunction with strong domestic demand for animal feed, limited the need to export grain products. In 2020-21, grain exports are expected to rebound to 6.6 million tonnes. The COVID-19 outbreak represents an ongoing hinderance for grain exports. The closure of restaurants and other hospitality industries across Asia has limited demand for animal products, subsequently reducing demand for animal feed such as grains. The gradual reopening of hospitality establishments is anticipated to rekindle demand for Australian grain products. The GDP of East Asia is expected to rebound by 6.2% in 2021, following a decline of 4.0% in 2020.
Exports in the Footwear Manufacturing industry are expected to recover in 2020-21, growing by 11.2% to $129.7 million. This trend represents a recovery from the loss of export revenue in 2019-20, caused by weaker retail demand associated with the COVID-19 pandemic. Over the past five years, many domestic manufacturers have grown into successful dominant players in established niche markets both in Australia and abroad. Australian footwear exports are anticipated to account for 18.4% of industry revenue in 2020-21.
Many industry operators have turned to export markets to support revenue as the domestic market has been increasingly flooded with low cost generic imports. Australian footwear has a unique and highly desirable global brand image, which enables firms to successfully operate in the high-end luxury footwear market. Australian-branded products are highly sought after in China, with the country's growing wealth increasing the industry's pool of potential customers. Australian luxury brands that rely on handmade craftmanship, such as R.M. Williams and Redback Boots, are expected to excel in the luxury footwear market in 2020-21, while cheap imports dominate the generic footwear market.
Exports from the Wood Chipping industry are expected to rebound in 2020-21, growing by 7.4% to $1.6 billion. Export revenue fell significantly in 2019-20, due to subdued demand from China and Japan. Chinese and Japanese paper manufacturers use Australian woodchips to manufacture paper products, with hardwood woodchips producing higher quality paper than softwood. Disruption to global supply chains has hindered the production of paper products. At the same time, weaker consumer sentiment and a global transition to online communication have hindered demand for paper. Australian wood chip exports were down by 26.6% for the year through May 2020.
In 2020-21, a return to normal operating conditions is anticipated to drive a resurgence in demand for paper products, and a consequent recovery in demand for Australian wood chip exports. The volume of wood harvested in Australia is expected to rise by 2.5% in 2020-21, to 33.3 million cubic meters. Stronger demand for the industry's products is likely to provide operators with opportunities to negotiate sale price increases. Increasing demand from China and Japan is likely to further boost profit margins over the next five years.
Pharmaceutical Product Manufacturing
The COVID-19 outbreak has placed unprecedented pressure on Australia's pharmaceutical supply chain, highlighting its heavy reliance on imported drugs and limited domestic manufacturing capabilities. Exports from the Pharmaceutical Product Manufacturing industry are expected to rise by 6.2% in 2020-21, to total $7.0 billion. Increased international demand for Australian-produced consumer healthcare products, such as vitamins and dietary supplements, is expected to drive export growth. Australian pharmaceutical products typically have a ‘clean and green’ brand image, supporting demand in overseas markets.
In 2020-21, approximately half of export revenue is expected to be derived from non-prescription pharmaceuticals, including vitamins and dietary supplements. Exports are anticipated to generate 55.1% of industry revenue in 2020-21, up from 33.8% five years earlier. In February 2020, major player AstraZeneca invested an additional $200.0 million into its Australian respiratory manufacturing facilities to support export growth over the next four years.
Several industry operators are involved in developing vaccines or running clinical trials of current medicines for COVID-19. If a viable vaccine were to be found, the medical breakthrough would represent an enormous export opportunity for the industry.
Export revenue from the Grape Growing industry is expected to rise by 4.5% in 2020-21, to $537.6 million. Over 90% of industry exports are sourced from Victorian vineyards. In 2019-20, the COVID-19 pandemic reduced demand from major export markets including China, Vietnam and Japan. Weakened consumer sentiment and the closure of restaurants and other hospitality industries contributed to lower demand for grapes. In addition, travel restrictions restricted the ability of vineyard operators to hire seasonal farm workers, hindering output.
In 2020-21, demand is anticipated to improve as major foreign markets gradually reopen hospitality outlets. However, a lack of access to seasonal farm workers is expected to continue hindering industry operations. Over the past five years, grape growers have increasingly mechanised harvesting practices to control production costs. In response to low supply of labour in 2020-21, grape farmers are expected to transition to increasingly mechanised harvesting processes. The industry is largely composed of owner-operators, with approximately 70% of farms relying on farm owner and family member labour.
IBISWorld reports used to develop this release:
- Nickel Ore Mining in Australia
- Grain Growing in Australia
- Footwear Manufacturing in Australia
- Wood Chipping in Australia
- Pharmaceutical Product Manufacturing in Australia
- Grape Growing in Australia
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647