Iron ore price, page-34318

Records continue to fall on China iron ore demand

Ronald MizenEconomics correspondent

Jul 22, 2021 – 1.31pm

China’s demand for iron ore accounted for almost half the value of goods exports in June, as frosty relations between Canberra and Beijing did little to stop the shipments from achieving a second consecutive record month.

Iron ore shipments to China rose $1.1 billion to $14.8 billion last month and the increase accounted for more than a third of the total month-on-month rise in the value of goods exported.

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Australia has become increasingly reliant on China’s demand for iron ore. Bloomberg

China accounted for about 85 per cent of the $17.6 billion in iron ore exported, the value of which was bolstered by supply constraints pushing the spot price to record highs above $US200 ($271) per tonne.

“Price was once again the predominant driver of the increase, up 5 per cent, with quantity also increasing, up 2 per cent,” the Australian Bureau of Statistics said.

The boost in the value of iron ore shipments in June came after a 20 per cent increase in iron ore sales to China in May. Iron ore exports rise $20 billion in April-June compared with the year-earlier period, said Robert Rennie, Westpac’s deputy head of research.

Demand for Australia’s iron ore has helped the federal budget bottom line improve by billions of dollars over recent years, and current prices suggest an additional $12.5 billion tucked away in the May budget’s sensitivity analysis is all but guaranteed if prices remain above $US150 a tonne.

Australia ships more than half of the world’s iron ore, followed by the 20 per cent share of Brazil, where recent issues have constrained supply and pushed prices higher. However, local miners have warned that Australian iron ore supplies could soften in coming months.

While BHP’s flagship iron ore division set a new export record in the year ended June 30, its performance in the past three months was weaker than expected and sales over the past six months were weaker year-on-year.

Many analysts hoped BHP would achieve its long-held goal of exporting 290 million tonnes of iron ore in fiscal 2022, but the miner said 288 million tonnes was the best it could do this financial year.

The result means the world’s three biggest iron ore producers – Rio, BHP and Brazilian miner Vale – are all underwhelming on supply at a time of record demand from steel makers in China.

Australia’s exports increased by $2.8 billion to $41.2 billion in June, with the goods trade surplus remaining steady at a record high $13.2 billion, the statistics office said in its preliminary trade report.

The June result represents the third record-breaking month since March.

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Australia increasingly reliant on China’s demand for iron ore

Coal drove substantial increases in exports to Japan (up 21 per cent) and South Korea (up 24 per cent), while iron ore exports to South Korea also increased by slightly more than $100 million, or 14 per cent.

Local demand for new cars led to a 25 per cent increase in road vehicle imports to $4.2 billion, which, along with increased demand for diesel (up 45 per cent), drove imports up 8 per cent to almost $28 billion.

The Australian government’s investment incentives, such as the instant asset write-off, have also led to a jump in demand for farming machinery, which was reflected in a $285 million increase of specialised machinery imports, to its third-highest monthly value of $1.2 billion.