Thursday, April 05, 2012

Coal and iron ore, they're less than they were

Coal and iron ore are losing their place as drivers of Australia’s economic growth.

Unexpectedly bad trade figures for February show income from resource exports down for the second consecutive month.

Over the quarter income from coal exports slid 19 per cent, income from metal ores and minerals exports slid 10 per cent.

“The commodity price cycle peaked in the third quarter of last year,” said HSBC chief economist Paul Bloxham. “Indeed, with global growth expected to be below trend and more commodity supply likely to come on stream over the next year or two, it appears likely Australia's terms of trade peaked in the third quarter as well.”

Australia recorded its second trade deficit in a row in February, $480 million after a downwards revised $971 million in January.

The balance had been in the black for all but one of the previous 21 months, the exception being flood-affected February 2011.

“It’s just as well that we don’t worry about current account deficits these days,” quipped BT Financial Group chief economist Chris Caton. “The currency may fall, but that wouldn’t be a bad thing. Oh hang on, the currency has fallen.”

The Australian dollar slid from 103 US cents to 102.7 in an unusual reaction to a trade report propelled by the belief it might herald a further slowdown in economic growth.

At issue is how much of downturn was due to the timing to the Chinese New Year and bad weather choking coal supplies...

JP Morgan economist Ben Jarman said the weakness in coal exports seemed “indiscriminate by destination”.

‘‘That’s consistent with the idea that the problem is at our end in terms of getting the supply out.’’

The high Australian dollar has also suppressed the Australian dollar value of export receipts.

An Australian Bureau of Statistics analysis of quantity shows the volume of hard coking coal exported fell 27 per cent in February while the volume of iron ore rebounded 16 per cent. The price per unit of hard coal slipped 1 per cent, the price per unit of semi-sort coal slipped 13 per cent and the price per unit of iron ore slipped 2 per cent.

“There is no need to hit the panic buttons just yet. Having said all that, the second consecutive trade deficit is is unlikely to ease investor concerns about the extent of the slowdown in China,” said Commonwealth Securities economist Savanth Sebastian. “Even more concerning is that rural exports have fallen for the fourth consecutive month. It adds to the array of reasons why the Reserve Bank should be cutting rates.”

In today's Sydney Morning Herald and Age

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