Gov’ lifts dirt forecasts (after drinking heavily)

The quarterly son of BREE commodities report is out and you can’t keep a good drunk down. Here’s the pearler assumption:

In 2015, real GDP is forecast to moderate to 6.8 per cent though government measures to support growth and maintain employment may result in growth above 7 per cent. Over the medium term, China’s GDP is assumed to moderate to average around 6.5 per cent by 2020. While the rate of growth is slowing, it will still support large year-on-year increases in commodity demand.

Leading to this:

Despite the forecast decline in export earnings in 2014-15, the outlook for the Australian minerals and energy exports remains positive. The prices of several commodities, notably iron ore and coal, are projected to increase towards the end of the outlook period. In addition, production and export volumes are projected to increase substantially as the high volume of investment over the past decade translates into new production capacity. The strongest growth in export earnings is projected for LNG, where the development of new projects is projected to contribute to a neartripling of Australia’s LNG exports. Towards the end of the outlook period, Australia will have the largest installed capacity in the world. Australia’s earnings from resources and energy exports are projected to reach $240 billion (in 2014-15 dollar terms) in 2019-20. Resources and energy export earnings are projected to total $137 billion and $102 billion (in 2014-15 dollar terms) in 2019-20, respectively.

And check out the volume forecasts:

Iron ore volumes are going to climb to 935mt? Thermal and coking coal too. China is past peak steel already and will shrink output by 50-100mt over the next five years but Son of BREE is having none of it, seeing ongoing growth to 895mt.

Take out that unicorn growth and add the fact that scrap will rise to roughly 150-200mt that leaves a total iron ore market of 1.1 billion tonnes for iron ore in China. That means Australian dirt will have to displace every iron ore tonne in China and every other nation and nearly all of Vale as well to meet the Son of Bree target. And it is assumed it will do that with rising prices beyond an immediate dip:

Is it any wonder the Budget is $%$#%?