Australia’s two major export markets released weak data yesterday which raised questions about the strength of demand for some of our key exports such as iron ore, oil, coal, LNG and services.
Japan is our second biggest export market and a report out yesterday showed that 4th quarter GDP went backwards at a faster rate than forecast or expected, raising questions about the government’s economic strategy and the Bank of Japan’s efforts to boost growth.
China is the biggest and exports tumbled sharply and imports were down nearly 19%, thanks to lower volumes for some commodities and sharp price falls for a host of products. The country’s trade surplus jumped to an all time record of more than $US63 billion.
In Tokyo, investors ignored the report, preferring to see it as the precursor to more stimulus from the Bank of Japan – which is pretty stupid given that the trillions of dollars spent on stimulus so far has failed to have any real, lasting impact.
The yen fell on these hopes – but the currency has surged in the wake of the move to negative interest rates by the central bank on January 29.
The Nikkei jumped the largest in seven years – rising more than 7% in one day (although it plunged 11% last week. The Chinese market was down 0.6% for the first day back after last week’s holidays.
It wouldn’t surprise if the Chinese government produced another easing in monetary policy in the next week or so, so weak were the trade figures.
China is Australia’s biggest market by far and in yesterday’s January trade report we saw more of what is now a familiar pattern in the last year – exports and imports falling more than forecast in January in both yuan and dollar-denominated terms.
Exports slumped 11.2% year-on-year last month to $US177.48 billion (much worse than the 1.4% slide in December). It was the biggest drop since a 15% plunge in March last year (and was also much worse than the 1.8% fall the market forecast).
But imports were worse – shipments into China crashed a massive 18.8% last month to $US114.19, from a 7.6% drop in January and against forecasts for a 3.6% dip.
This was the biggest monthly drop in imports since last September and also means shipments have now contracted year-on-year for the last 15 months in a row.
Imports had expected to stronger than they were because of industry restocking ahead of last week’s Lunar New Year holiday, but that now seems to have happened in December instead.
China’s trade surplus rose to $US63.29 billion last month from $US60.09 billion in December.
But January last year also saw some large than expected changes in imports and exports (the Lunar New Year started on February 19, 2015).
Exports fell 3.3% from January, 2014 but imports slid 19.9% (the biggest monthly fall since the GFC in early 2009) far worse than expected and triggering new fears about the deepening weakness in the Chinese economy.
China posted a record monthly trade surplus of $US60 billion in January, 2015. Imports fell because commodity imports were down sharply, unlike last month when exports edged higher in some cases.
China’s exports to the US, its biggest market, fell 9.9% last month from a year earlier, while exports to the European Union – the second biggest market, dropped 12%.
Looking at the Chinese import data, iron ore imports rose 4.6% in January from January last year to 82.19 million tonnes,. But that was sharply lower – in fact 14.6% lower – than the record 96.27 million tonnes imported in December.
For those reasons imports of iron ore are expected to be seasonally weaker in February and March while the industry uses up the extra imports. Iron ore for immediate delivery to northern China fell more than 3% in January, after prices tumbled 40% in 2015. But prices have risen sharply so far in February, although the question now is, when do they start retreating?
China imported a record 952.72 million tonnes of iron ore last year.
Chinese’s steel exports fell 5.3% last month to 9.74 million tonnes, from January a year ago and 8.6% from December as foreign countries start cracking down on export levers.
The official customs data also showed that crude oil imports in January fell 4.6% on a year earlier to 26.69 million tonnes, while coal imports fell to 15.32 million tonnes, that was down 9.2% from the same time last year.
China’s coal imports fell 30% in 2015.
China’s copper imports rose 5.3% compared with last January, to reach 437,000 tonnes (copper prices fell sharply in January), while soy imports fell 17.7% in January to 5.66 million tonnes.
