Australia’s Resilience Versus Trade War May Prove Fleeting

The trade war between the U.S. and China may be in abeyance – as outlined in Panjiva’s research of Jul. 4, there is the risk of a sudden escalation once more – but has begun to have a knock-on effect at the country, product and corporate levels.

Not everyone has lost out so far, however. Panjiva’s analysis of official data shows that while China’s total imports fell 4.1% year over year in 2Q, shipments from Australia – which accounted for 5.2% of the total – actually increased by 10.4%. The latter has seen an improvement every month so far in 2019.

AUSTRALIA’S EXPORTS TO CHINA PROVING TRADE-WAR RESISTANT

Chart segments change in Chinese imports by origin. Calculations based on China General Customs Administration data.
Source: Panjiva

The improvement likely reflects the high proportion of commodities within Australia’s exports to China. Shipments of metals ores accounted for 49.9% of Australian exports in 2018, while Australia accounted for 47.2% of China’s imports. Similarly shipments of energy products – mostly coal – accounted for 21.7% of Australian exports and 9.8% of China’s imports.

Other products where Australia accounts for a significant part of Chinese imports include cereals (23.5%), salts and sulfurs (18.0%) and miscellaneous food (17.4%).

CHINA PURCHASES FROM AUSTRALIA FOCUSED TO A HANDFUL OF PRODUCTS

Chart segments Chinese trade with Australia by product in 2018. Bubble size indicates total value of Chinese imports from all origins. Calculations based on China General Customs Administration data. Source: Panjiva

China’s slowdown has mostly been broad based but led by high tech products where exports fell 30.2% YOY in 2Q after a 1.6% slip in 1Q. Engineered products using iron and steel were also down but less so for cars which dropped 10.1%, car parts down 4.5% and ship building which slumped by 30.0%.

Steel and aluminum exports have suffered from spreading global protectionism triggered by prior U.S. tariff cases. Chinese exports of steel fell year over year in 2Q 16.6% from +2.4% in 1Q, while aluminum exports slid 2.6% after a 4.4% improvement.

STEEL, TELECOMS THE MAIN DRAGS ON CHINESE EXPORTS

Chart segments Chinese exports to all destinations by product. Bubble size indicates total exports in 2018.
Calculations based on China General Customs Administration data. Source: Panjiva

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As a consequence Chinese imports of iron ore fell by 7.9% year over year in 2Q in volume terms including a 9.7% drop in June. That came after a 3.6% slide in 1Q. Imports of copper ore increased modestly in 2Q with a 1.6% rise, though June saw a 16.6% slump, suggesting a reversal may be underway.

Imports of fuels including coal – which rose 6.4% in June – and natural gas, which improved 3.0% are slowing but still positive.

COPPER COLLAPSES, IRON ORE CORRODED THROUGHOUT 2019

Chart segments Chinese imports from Australia by product. Calculations based on China General Customs Administration data.
Source: Panjiva

Date of publication: July 15, 2019

Copyright © 2019 by S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved. No content may be reproduced or distributed without the prior written permission of S&P Global Market Intelligence or its affiliates. The content is provided on an “as is” basis.

Australia’s Resilience Versus Trade War May Prove Fleeting

Leverage Panjiva global trade data foressential insights into your supply chain.

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Leverage Panjiva global trade data for
essential insights into your supply chain.