According to figures from the Australian Bureau of Agricultural and Resource Economics (ABARE), export income from the mining sector slowed sharply in the March 2008 quarter compared with the corresponding period last year; and that a small increase on the December 2007 quarter was only due to higher prices for coal and oil: without that, quarterly export income would have been lower.

So is the resources boom faltering?

ABARE’s March 2008 results provide somewhat of a reality check as the more that surging oil prices cut world growth and lift inflation, the greater the chance of the boom being punctured becomes.

Other factors do however have to be factored into ABARE’s results, such as bad weather in Queensland’s coal fields and cyclones which affected the mining industry in WA. Although sharp price falls for zinc, lead, plus lower production for some other minerals, including coking coal, do hurt.

The Reserve Bank has warned that we not only face a problem with inflation, but a problem with too much money in the coming year as the terms of trade surge on the back of huge prices increases for iron ore, coal and oil and gas.

It is that surge, which will start kicking in shortly, which has enabled the resource industry to paper a nasty little slowdown.

According to the ABARE report:

The index of export prices of Australian mineral resources (export unit returns) increased marginally by 0.5% compared with the December quarter 2007, as higher energy prices were almost fully off set by lower prices for metals and other minerals.

Compared with the March quarter 2007, the index of export prices was nearly 4% lower, with higher energy prices (up nearly 8%) more than offset by a decline in prices for metals and other minerals (down 10%).

Prices for metals and other minerals have declined over the past 12 months, largely as a result of increased supply for some commodities and weaker demand growth driven by the uncertainty surrounding the outlook for the US economy.

There were significant increases in export earnings in the March quarter 2008 for: thermal coal, up $292 million (16%) to $2085 million; refined gold, up $363 million (15%) to $2858 million; copper, up $190 million (13%) to $1700 million; nickel, up $132 million (10%) to $1485 million; and iron ore and pellets, up $190 million (4%) to $4729 million.

The higher earnings reflect slightly higher export volumes and higher prices for most of these commodities.

However, despite some increases there were downturns in several key commodities.

ABARE said that export earnings in the March 2008 quarter for lead fell 43% or $288 million to $387 million; uranium oxide, down $87 million or 34% to $172 million; zinc, down $294 million (31% to $651 million; metallurgical coal, down $387 million (12%) to $2910 million; and alumina, down $175 million (12%) to $1286 million.

So despite the decline in prices for some metals and minerals, what went right to keep our export income from falling further?

Well the list is long: global oil prices surged again in March, through until now coal prices have risen even further for both thermal and coking types because of the brutal Chinese storms which cut Chinese coal exports. ANd the Sichuan quake has seen China cut back on exports of diesel fuel and redirect them to the quake area: that has helped push up oil and thermal coal costs in Asia.

The WA gas crisis is helping in a perverse way, because it is adding to demand for coal, diesel and gas in Asia and making sure prices remain high.

And the Queensland floods kept millions of tonnes of coal off the Asian market, and helped coal exporters take advantage of the tight conditions to boost 2008-09 export prices by 250% to 300% in many cases. And the row over the BHP-Rio merger, and the push by the two Australian iron ore suppliers for an extra boost to the already high 65% plus price rise for the coming year, has allowed them to snap up even higher rises of 90% or more with some desperate buyers in Asia.

All this will give us a rise in the terms of trade that the RBA is warning about.