Australia Didn't Kneel

 

Australian exports surge despite China hostility, ASX follows.

Despite Beijing's increasingly hostile trade war, Australia sold a lot more goods to China (particularly iron ore) in December.

Key points:

• Australian CPI (inflation) is expected to rise 0.7pc in the December quarter
• Apple, Facebook and Tesla will report quarterly results on Thursday (AEDT)
• The Australian share market is trading around its highest level since February 26, 2020

Australia managed to divert its coal and barley shipments to other countries like Japan and India, according to the Bureau of Statistics' (ABS) latest preliminary trade data.

China imposed crippling tariffs on Australian barley in May, a decision which the the Federal Government is appealing to the World Trade Organization (WTO).

It also also imposed an unofficial ban on Australia's coal shipments, slapped huge tariffs on the wine industry, among many other restrictions on goods like timber, lobsters and beef.

However, the surprisingly strong ABS figures did very little for the local share market, which crept to an 11-month high, or the Australian dollar, which is still trading near a 2.5-year high.

"The strong surplus is heavily influenced by trade with China," the ABS said in a statement on Monday.

Exports to China went up $2.3 billion (+21pc) in December, compared to the previous month — while imports fell $641 million (-7pc).

All up, this sent Australia's monthly trade surplus with China (for goods) surging to $5.2 billion.

Around 40 per cent of Australia's exports go to China, which underscores the economic importance of the nation's second-largest trading partner.

Conversely, about 29 per cent of Australia's imports (particularly electronics and mobile phones) come from China.

Fourth largest trade surplus ever

According to the ABS December data, the "big picture" is that the value of Australia's:

• exports went up to $34.9 billion — a big jump compared to November (+16.3pc), and marginally higher than it was a year ago (+2.5pc).
• imports fell to $25.97 billion — a significant fall compared to the previous month (-8.8pc), and slightly lower than the previous 12 months (-0.1pc).

Overall, Australia recorded its fourth-largest monthly trade surplus (for goods) on record, at $8.96 billion — after the value of imports were subtracted from exports.

The ABS said the strong December exports figure was driven by Australia selling a lot more of these goods overseas:

 

Commodity	Change in sales
Metalliferous ore	Up $2.8 billion (+22pc) The overwhelming majority of that (82pc) was from iron ore, up $12.5 billion (+21pc) The ABS noted: "The value of Australia's exports of iron ore to China rose $1.95 billion (+25pc)" It also accounted for "79 per cent of Australian iron ore exports in December" "The increase was driven by a rebound in quantity from November (up 15pc) and strong prices" "On average, China paid 9 per cent more per tonne in December for Australian iron ore than in November"
Cereals	The ABS said the monthly rise in cereal exports was the largest ever It was driven by wheat, up $604 million (+423pc) and barley, up $182 million (+254pc) 42 per cent of December's barley went to Saudi Arabia (valued at $106 million) "Favourable growing conditions in Australia, coupled with less favourable conditions in other wheat growing regions such as Russia (the world's largest wheat exporter), has driven demand for Australian wheat to record highs" "Exports of wheat to China reached $250 million, after nil exports since August 2020" Those China exports were a third of total wheat exported from Australia in December They were also "88 per cent of the total cereal exports to China", making it the "largest monthly wheat export on record to any single destination country"
	Exports of hard coking coal went up $501 million (+38pc) "While hard coking coal exports to China have diminished since mid-2020, increased exports to India, Japan and South Korea have offset some of the fall" Australia's three largest export destinations for coal all recorded large increases in December. They include: Japan, up $236m (+27pc); India, up $272m (+38pc); South Korea, up $148m (+48%).