Australia’s trade surplus swells to $3.5bn in December

The dollar has taken off after the ABS reported commodity exports led to a record $3.5bn trade surplus in December.

 

Australia posted a seasonally adjusted trade surplus of $3.5 billion in December, notching a new record, the Australian Bureau of Statistics said Thursday.

By 12.48pm (AEDT), the Australian dollar had shot to US76.30 cents, up from US76c just prior to the data release at 11.30am.

The December result compared with a surplus of $2.04bn in November and a previous record surplus of $2.24bn in February 2009.

The figure is sharply wider than analysts’ expectations of a surplus of $2.2bn.

The value of exports rose by 5 per cent in December from November helped by a 14 per cent increase in coal and a 10 per cent rise in iron-ore shipments, while imports rose by 1 per cent, the statistics bureau said.

Australia’s trade balance has swung quickly from deficit to surplus on the back of strong gains in iron ore and coal prices in 2016, while the volume of natural gas exports has also started to rise sharply.

The price for iron ore and coal, among Australia’s top exports, increased sharply last year, while many other commodities such as copper also rose.

Steelmaking coal -- of which Australia is the world’s No. 1 supplier -- surged more than threefold in value during the second half of 2016 because of a Chinese policy that restricted its own production of the commodity.

Iron ore prices also doubled last year, rebounding from a more-than decade low thanks to robust demand from China’s steelmakers, who produce roughly half the world’s steel.

At the same time, export volumes for both iron ore and coal are rising as new and expanded mines ramp up in remote parts of the Australian outback, and top producers such as BHP Billiton work existing operations harder.

Australia’s trade recovery is also being bolstered by rising shipments of liquefied natural gas, after billions of dollars were invested in new facilities here by companies including Chevron and Royal Dutch Shell.

Australia’s share of global LNG exports is expected to rise to 24 per cent in 2018 from 12 per cent in 2015, the government said in a report last month.

Australia’s improved trade performance may carry into 2017. While coal prices have cooled since December, after Beijing eased its production curbs, Australian miners locked in big portions of their sales for the first quarter of this year near market highs around $US300 a metric ton.

Iron ore prices also continue to trade around two-year highs above $US80 a ton.

The Australian government has forecast the value of resources and energy exports to increase by 30 per cent in the year through June, 2017, to a record $204bn. However, it expects a pullback in coal and iron ore prices - because of slowing demand growth from China’s steel sector and higher global supplies - will lead to a small fall in the year that follows, to roughly $202bn.

Dow Jones Newswires