June 21 (Bloomberg) -- Australia raised its export forecast for commodities to a record A$93.4 billion ($64 billion) next fiscal year as the biggest shipper of beef, coal, iron ore and wool gains from a weaker currency and surging demand in China.

The Australian Bureau of Agricultural & Resource Economics raised its forecast of commodity export earnings for the year ending June 30, 2005, by 5.9 percent from its March forecast of A$88.2 billion. Export revenue would be 14 percent higher than the current year, the Canberra-based bureau said in a report.

Expansion of China's steel, auto and construction industries boosted annual contract prices of raw materials by as much as a quarter, increasing profits at miners such as BHP Billiton and Rio Tinto. China's efforts this year to cool growth will fail to prevent shipments of iron ore and coal rising by a further A$7 billion next year, the bureau said.

``China is going to continue to be a major consumer of these commodities,'' Mark Pervan, a resources analyst with Daiwa Securities SMBC in Melbourne, said in an interview. An increase in coal and iron ore prices for export through to March 2005 and a declining Australian dollar ``will mean sustained earnings upside for BHP and Rio Tinto.''

The Australian dollar may average 68 U.S. cents in 2004- 2005, the government's commodity forecaster said. That compares with the 75 cents it forecast in March. The currency has averaged 71.42 cents since July 1, 2003, and touched a nine-month low of 67.78 cents Thursday. It traded at 69.06 cents at 10:11 a.m. Sydney time. A weaker Australian dollar boosts the value, in local currency terms, of U.S. dollar-priced commodity sales.

Happy

``We can't help but be happy with the way things are at the moment,'' said Mark Ashley, managing director of LionOre Mining International Ltd.'s Australian operations. The company's Australian mines supply nickel concentrate to Inco Ltd. A lower local dollar means ``we're making more money.''

Toronto-based LionOre reported net income of $58 million last year, compared with about $3 million in 2002.

Higher export earnings will buffer an economy that grew at its slowest pace in more than a year in the first quarter after home building and business investment fell. A housing boom and higher consumer spending helped Australia's economy grow an average of 3.7 percent annually the past three calendar years as drought and a global slowdown reduced exports.

``We're looking for a transition in the drivers of growth moving from domestic spending toward external demand,'' Brian Redican, senior economist at Macquarie Bank Ltd. in Sydney, said in an interview. ``The recent weakening in the Australian dollar has been a help there, along with stronger-than-expected global growth.''

The commodity forecaster expects the Australian economy to expand 3.5 percent in 2004-2005 after growing at a 3.8 percent pace in the current year. Global growth is forecast to reach 4.2 percent in the current calendar year, from 3.7 percent last year.

Coal Demand

In Japan, Australia's largest export market, the economy is forecast to grow 3.2 percent this year, the bureau said. It expects the economy in the U.S., Australia's second-biggest trading partner, to expand at a 4.5 percent rate.

``The Asian economies are strong and their demand for electricity is growing,'' which is boosting demand for thermal coal, said Bob Cameron, managing director of Centennial Coal Co. The Sydney-based company exports the fuel to power utilities in Japan, South Korea and Taiwan.

``The fact that Chinese power is so great and is growing so quickly means China's coal industry is struggling to keep up, prompting local suppliers to hold product back from export,'' Cameron said. ``Basically Australia is filling that gap.''

Australia's thermal coal exports are forecast to surge 53 percent to A$7.1 billion next year, from A$4.6 billion in 2003- 2004, helped by higher prices and a 4.3 percent increase in volumes, the bureau said.

More Rises?

``Right now, you'd have to say there is a good probability of some further price rises'' when export contracts are negotiated next year, said Tony Haggarty, managing director of Excel Coal Ltd., a Sydney-based coal exporter.

Exports of coking coal, Australia's most-valuable commodity export, are expected to climb 38 percent to A$9.2 billion next year, helped by an 11 percent increase in sales volumes, the bureau said. BHP Billiton, the world's biggest coking exporter, said in February it would get an average of 28 percent more for the steelmaking material in the year ending March 31, 2005.

In other commodities, sales of iron ore are expected to jump 40 percent to A$7.6 billion after Rio Tinto and BHP Billiton, the world's second- and third-biggest exporters of the commodity, expanded production and prices rose by almost a fifth. Alumina exports are forecast to increase by 8.3 percent to A$4 billion, while aluminum shipments may rise 12 percent to A$3.8 billion.

A record wheat harvest and improved prospects for this year's crop are expected to boost overseas sales of the grain by 24 percent to A$4.2 billion. Wheat is Australia's biggest farm export and Australia is the world's second-largest exporter of the cereal behind the U.S.

The price of West Texas Intermediate crude oil is forecast to average $37.10 a barrel this calendar year, the bureau said. That compares with the $31.06 a barrel the bureau predicted in March. Crude has averaged $36.78 a barrel so far this year on the New York Mercantile Exchange.

To contact the reporter on this story: Jason Gale in Melbourne at j.gale@bloomberg.net.

Last Updated: June 20, 2004 20:28 EDT