Lower coal and iron ore prices are set to substantially erode Australia's export earnings in 2009/10 but should be offset partially by strength in the gold price.
Underpinning commodities forecasts is belief in China's economic resilience, tempered by strong evidence the rest of the world will not bounce back in a hurry from the largest economic slowdown since World War II.
Most analysts say the commodities market will remain flat or improve modestly at best in the next six months.
But some say global markets could test new lows, suggesting that signs of recovery in recent months could prove to be a "sucker rally''.
The Australian Bureau of Agricultural Economics (ABARE) predicts that the total value of commodity exports will fall 18 per cent in 2009/10 to $160.4 billion, mainly reflecting lower contract prices for coal and iron ore.
However, Ord Minnett senior resource analyst Peter Arden said volumes would stay surprisingly strong as China's urbanisation doggedly continued, albeit at a much slower pace than in recent years.
Mr Arden said Australian iron ore accounted for 80 per cent of China's imports in recent months, up from 40 per cent historically, as steel makers shied away from higher freight prices from Brazil.
"Steel demand has picked up much more strongly than I expected ... 10 per cent more than last year ... but that's just not sustainable,'' Mr Arden said. "That will ease.
"China is still going to suck in a lot of imports of iron ore from Australia, but it will be at a lower price.
"The volume is the key to it.''
Mr Arden said he expected Chinese customers would accept a 37 per cent cut in the average price, which was recently negotiated by Korean and Japanese steelmakers with mining giants Rio Tinto and BHP Billiton.
Contract iron ore prices for 2009/10 are yet to be finalised with Chinese customers.
On coal, Mr Arden said prices had been hammered - particularly for coking coal used in steelmaking - and the outlook was weak.
BHP Billiton recently agreed to a 58 per cent price cut for coking coal contracts to about $US128 a tonne, down from the record price last Japanese fiscal year of about $US300 per tonne.
Mr Arden said there had been a strong lift in Australian coal export volumes to China, which had become a net importer of the bulk commodity for the first time as its large domestic production failed to meet its needs.
This helped to offset the sharp reduction in Australian coking coal exports to other Asian countries, especially Japan.
Australia's export volumes of thermal coal, which was used in energy generation, had been "reasonable'', while export volumes of coking coal had been "not so good, which wass going to be an ongoing thing'', Mr Arden said.
Prices for base metals, particularly nickel, lead, zinc and copper, have regained a modest amount of ground in recent months after plunging in late calendar 2008 and early this year.
Mr Arden said that stockpiling had given an "artificial lift to base metal prices'' in the past six months.
ABARE forecasts the value of metals shipments will fall 12 per cent to $74.5 billion in 2009/10.
"Lead and zinc may do okay but the nickel price might come back a bit, with some new mines coming into production over the next three to six months,'' Mr Arden said. "The world isn't going to be able to absorb much more nickel.''
Mr Arden said the price of copper, which is tied to the power and construction industry, would stay fairly firm around $US5000 per tonne.
This compared to a 2009 low of $US3000 per tonne and a 2008 high of $US9000 per tonne.
Aluminium prices have also lifted after slumping in the March quarter but demand from China remained soft, Mr Arden said.
"Aluminium may struggle.''
CommSec commodities analyst Lachlan Shaw said there was potential for 10 to 15 per cent growth in Australia's iron ore export volumes to China in the June quarter.
Shaw warned that the iron ore market was headed for oversupply, with near-record stockpiles in China's iron ore ports.
On coal, Mr Shaw said Chinese buyers had recently purchased a shipment of Queensland coking coal at $US132 per tonne - above the 2009/10 contract price - which was "a pretty bullish sign''.
On gold, analysts says the safe-haven precious metal will retain its shine in tough economic times.
Broker Fat Prophets predicted "a very powerful move in the gold price towards the $US1200 per ounce (oz) region and beyond''.
The broker expects gold to be supported at $US890 and $US865 in coming weeks, down from $US935 currently, but "this in no way detracts from our bullish longer-term outlook''.
"Despite bouts of volatility, the past 15 months of choppy consolidation is merely a corrective phase within a much larger bull market,'' it said.
"We believe gold will break higher this year.''
Fuel demand would stay high, driven by Asia's growing automotive industry and the Organisation of Petroleum Exporting Countries "cutting output by stealth'' to support the oil price.
Fat Prophets said higher oil prices were "achievable over the medium-term, once the latest corrective phase is complete''.
"Like most the commodities, energy has had a strong run and is in need of consolidation,'' it said.