Australia cut its estimates of annual zinc and nickel output on Monday, citing falling prices and a domestic energy crisis, but kept a bullish outlook for its giant mining industry despite fears of global recession.

    Australia is a major global supplier of iron ore, coal and base metals and has been making record profits from sales to China and other developing economies, but there are concerns that the party may finally come to end over the next 12 months.

    Australia accounts for nearly 13 percent of the world's annual zinc output and almost 17 percent of global nickel production, data from Reuters' Metals Production Database shows.

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  The Australian Bureau of Agricultural and Resource Economics cut its zinc and nickel production forecasts by 12 percent and 8 percent respectively for the year to June 30, 2009, after a fall in prices for both commodities and a recent power outage.

    It said in its September report zinc output would total 1.49 million tonnes for 2008/09, down from a previous forecast of 1.69 million tonnes and its 2007/08 estimate of 1.57 million tonnes.

    Mined nickel output was forecast to total 236,000 tonnes in 2008/09, down from a previous forecast of 256,000 tonnes but still up sharply from 190,000 tonnes a year ago. 

    Production of zinc, used to rust-proof iron and steel, and nickel, used to make stainless steel, both took a hit from June when a gas plant off Western Australia state blew up, taking down about a third of the huge mining state's power supply.

    The gas plant is still only working at partial production after extensive repairs and is only expected to resume full output by the end of this year.

    Zinc prices MZN3 have fallen by a quarter this year to $1,776 a tonne on Monday, and by two-thirds from a record high hit in November 2006, on growing oversupply. Even before the power outage, zinc miners were already looking to cut output.

    "The falling zinc price has led to several mines closing or reducing output," ABARE said in its September quarterly report.

    GOOD TIMES STILL ROLL

   Nickel prices MNI3 too have slid, falling 35 percent this year on weaker demand from stainless steel mills, but ABARE said its lower nickel forecast for 2008/09 largely reflected the power crisis, which erupted days before its last forecast in June.

    "When we went to press in June that was very shortly after that incident, so since then we have had time to get an idea of exactly the effect of that damage," said Alan Copeland, senior commodities analyst with ABARE.

    ABARE also cut its gold forecast by almost 8 percent to 236 tonnes for 2008/09 [nSYD64084], though this was still above 2007/08, and said output of iron ore and copper would top earlier forecasts despite the Western Australia gas crisis. 

    Overall, ABARE forecast another export bonanza for the Australian economy, predicting a 53 percent jump in the value of minerals and energy exports to around A$180 billion ($150 billion) for 2008/09 from a year earlier.

    Melbourne-based analyst Mark Pervan, head of commodities research for ANZ, said he expected softer demand for Australian metals over the next nine months but was confident in the long-term trend for growing demand from developing Asia.

    "In the longer term, I am a bull...but I am concerned about the next six to nine months or so," he said.

    Zinc is among only a few metals headed for a big reversal in terms of Australian production between 2007/08 and 2008/09.

    The global zinc market saw a surplus of 77,000 tonnes in the first seven months of 2008, the Lisbon-based International Lead and Zinc Study Groups said last week. Refined zinc use rose to 6.775 million tonnes from 6.575 million a year earlier, while output was 6.852 million tones. 

    Rising production costs and weak prices have forced a number of Australian zinc producers to scale back output or re-direct mining efforts to focus on other metals. ($1=1.199 Australian Dollar)