Significant day today with a big fat green candle breaking ground. Lumpy orders and big volume on buy side with volume of 37M traded. AGO's best day for a while.
November 6, 2013 - 2:37PM
The continued resilience in iron ore prices and record exports to China are boosting Australia's growth this year, HSBC economists say.
Iron ore prices have remained stronger for longer despite expectations they would ease as market demand enters a slow period, holding above $US130 a tonne in recent times and boosting shares in Australian suppliers to multi-month highs.
Iron ore exports rose 3.2 per cent in September, the latest trade figures released today show. At the same time, Port Hedland data released on Tuesday showed exports to China reached a new high in October.
The rise in export growth is estimated to have boosted Australia's nominal GDP this year by about 0.9 percentage points, HSBC economists Paul Bloxham and Adam Richardson said in a research note.
Advertisement Export volumes for iron ore - Australia's single biggest export - are estimated to have risen about 16 per cent in 2013, with prices up 7 per cent compared to last year, the economists said.
"A pick-up in Chinese infrastructure investment in recent months has supported demand for iron ore.
"Indeed, a strong pickup in Chinese spending on infrastructure in recent months saw iron ore prices rally in the third quarter, which is typically a seasonally weak quarter."
In the year to September, imports into China surged to a total of 794 million tonnes - a new high. Analysts expected the October monthly figures to come in above the levels of the same month last year.
"What we're seeing happening is that some of the internal production that China was producing is actually being transferred to external purchases, and that's probably because a lot of their mines were high cost. So when the price collapsed it became uneconomical to keep operating them, and hence they focused on importing," Fat Prophets resources analyst David Lennox said.
"They'll keep doing that until the price get to a point where there's some form of equilibrium, and then they'll probably swing back to internal production."
However, slower investment growth for China is expected next year. HSBC analysts estimate that iron ore prices could fall from $US134 to $US115 in 2014, potentially knocking 0.6 percentage points off Australia's nominal GDP.
That in turn is expected to be offset by a forecast 17 per cent pick-up in export volumes.
Across the sectors, Australian goods exports to China surged 50 per cent year-on-year as the country continues to boost the traded goods sector, UBS economist George Tharenou said.
