AFR article this morning:
Coal exports hit four-month high despite China trade
China’s restrictions on Australian coal might be proving futile, with exports finding new markets, helping to drive the strongest monthly trade surplus in six months.Seasonally adjusted monthly coal exports hit $3.16 billion – the biggest in four months despite the Chinese Communist Party’s unofficial edict to state-owned steel producers and power stations to stop importing Australian thermal and coking coal.Separate to coal, Australia’s exports of metal ores and minerals enjoyed their best month on record, sending out $13.9 billion worth, up from $13.4 billion in November.Coal exports have hit a four-month high, despite China’s restrictions. Bloomberg Buoyed by these gains in coal, iron ore and gas, non-rural exports increased by 2.2 per cent, pushing Australia’s trade balance to $6.7 billion in December, up from $5 billion in November.Both the value and volume of these commodity exports were stronger in the month with exports higher to several markets, including China, Japan, Hong Kong, India and South Korea. ANZ’s senior commodity strategist Daniel Hynes said there was clear evidence that Australian coal had found other homes.“We are just starting to get data from various sources showing that all the numbers for thermal and metallurgical coal are holding up,” Mr Hynes said.“Commodity markets are a zero sum game. When China pulls resources from another source that just means some other country has to find a new place to buy.”Mr Hynes said Japan, India and South Korea were likely to have sought more coal from Australia.Despite China’s trade restrictions on barley, wine and beef, Australia’s rural exports were up 18.4 per cent in December. Cereal exports jumped due to good growing conditions in eastern Australia and less supply from global competitors. The jump in rural exports follows solid gains in both October and November of 7.6 per cent and 3.8 per cent respectively.Across the export destinations China remains the biggest export market, accounting for 38 per cent of Australia’s exports in December, worth $13.4 billion – up from 36 per cent share in November, official figures from the Australian Bureau of Statistics showed.The bulk of exports to China are iron ore. The iron ore price rallied to a high of $US176 a tonne in December as Chinese demand for the steel-making ingredient remained strong. Iron ore last traded around $US152 a tonne.The trade figures also showed that Australian consumers drove record imports goods worth $9.86 billion, up 2 per cent.NAB economist Tapas Strickland said the record number was clearly “suggesting retailers are anticipating continued strength in retail demand”.Consumption goods imports were driven by household electrical items, cars, toys, books and leisure goods. Citi economist Josh Williamson said the record consumer imports were a sign of recovering domestic demand.The Reserve Bank is expected to upgrade its consumption forecasts on Friday in its Statement on Monetary Policy.Mr Williamson upgraded his December quarter GDP forecasts from 2.3 per cent to 2.6 per cent following the improved trade data.“On balance, the December quarter real net-export data has been slightly better than we expected,” Mr Williamson said.The balance on goods and services for 2020 calendar year ended up as a surplus of $72.7 billion – an increase of $5.2 billion on the surplus of $67.5 billion recorded in 2019.
source: AFR Matthew Cranston Economics correspondent
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