Australia’s exports of iron ore, cereals and meat to its most important trading partner fell in January due to bad weather and industrial factors, the latest preliminary trade data from the Australian Bureau of Statistics (ABS) shows.
Despite its ongoing political conflict with China, trade between the two countries remained steady last year. The total value of Australia’s goods exported to China reached A$145.2 billion (US$114.6 billion) in 2020, or just 2.16 per cent less than A$148.4 billion in 2019, which was the highest total recorded in ABS data since 1988.
In January, the total value of Australia’s iron ore exports to China fell 5 per cent, driven mostly by a decline in shipments but offset somewhat by high prices, the ABS said.
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Analyst Navigate Commodities managing director Atilla Widnell attributed the lower iron ore shipments from Australia last month mainly to production being disrupted by cyclones and seasonal mine maintenance.
Throughout January, the ports authority in Australia’s mining region of Pilbara issued several cyclone warnings, resulting in iron ore production being seasonally low to start the year – an annual occurrence.
Additionally, there was less demand among Chinese steel mills in January, as industrial activity shut down leading up to the Spring Festival holiday. And this was worsened by a coronavirus outbreak that hit Hebei province, China’s steelmaking hub, Widnell added.
Chinese commodities analyst Mysteel Global expects the shutdown of Chinese steel mills to be protracted, pointing to the coronavirus outbreaks, a smaller supply of coking coal and a colder-than-normal winter. It said this has adversely affected shipments from both Australia and Brazil in January and February.
But strong interest in iron ore futures when the Chinese market opened late last week signalled an eventual recovery in demand for the raw material after the holidays and the cold winter.
“Iron ore futures jumped as Chinese markets reopened,” ANZ Research said in a note late last week. “The buoyant mood has been supported by bullish outlooks from the major exporters. [Australian iron ore miner] Fortescue was the latest, expecting the market to be very robust for some time. [Fortescue] CEO Elizabeth Gaines noted uncertainty around Brazilian supply and disruption from cyclones in Australia.
“The sell-off in iron ore continued … as investors weigh up increasing shipments ahead of the seasonal weak period for demand from China. Ship-tracking data is showing a rise in exports from Australia, despite the threat of cyclones off the coast of Western Australia.”
The decline in Australian exports of cereals to China was driven by a fall in bulk wheat exports, which dropped following an unexpected record sale of wheat to China in December when major Black Sea wheat market Russia was short on supply due to bad weather and a new export tax designed to curb domestic food inflation.
In December, Australia shipped a record A$248 million (US$219.44 million) worth of wheat to China – the largest-ever monthly wheat export total from Australia to any single country.
There are no indications as to whether China will continue to increase imports of Australian wheat this year, though Black Sea agricultural research firm SovEcon forecast Russia’s wheat crop will fall this year amid poor weather conditions.
For meat exports to China, the decline was driven by a fall in boneless-beef shipments following seasonal closures of many Australian abattoirs in January, the ABS said.
In general, the Australian beef trade with China had a tumultuous run last year due to the trade suspensions of five processing plants, Australia’s Meat & Livestock Association said in a report last month.
But despite a 39 per cent fall in frozen beef exports to China last year compared with 2019, China remained Australia’s third-largest beef buyer, the association said.
The volume of overall meat exports to China remained healthy. China was the top destination for both Australian lamb and mutton last year, though total exports of lamb and mutton fell compared with 2019.
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