Coal exports tumble 16pc on bad weather, industrial action

BY: ADAM CREIGHTON
From: The Australian April 04, 2012
AUSTRALIA'S export performance, which has underpinned its economic resilience, appears to be faltering, as the value of exports fell short of imports for the second month in a row in February.

Australian exports fell 2 per cent in February, contributing to a monthly trade deficit of $480 million, the second largest monthly deficit since early 2010, data from the Australian Bureau of Statistics showed.

The value of rural exports fell 9 per cent, while commodity exports, the largest component of Australia’s exports, fell 3 per cent to $16.6 billion in February.

Crucial coal exports fell 16 per cent as mining was hit by bad weather and strikes.

"This is a shocking trade result, and the bulk of the disappointment came from the failure of commodity exports to recover from their January decline” said Josh Williamson, an economist at Citi.

The Australian dollar tumbled soon after the data was made public, extending a week-long slide that put the unit at its lowest level since mid-January. The local currency was trading at $US1.0279 about mid-day, from an earlier intra-day high of $US1.0332.

The sharemarket was nearly 0.4 per cent lower at the time, as resource companies were sold off. Shares recovered slightly by mid-afternoon, to be down about 0.2 per cent.

Economists had been expecting the trade balance to improve from the large $971 million deficit in January, and bounce back to a $1.1bn surplus. A relatively early Chinese New Year in 2012 was thought to have 'artificially' caused January’s trade figures to be weak.

Ben Jarman, an economist at JPMorgan, said an improvement in commodity exports might have been hampered by resumption of flooding in Queensland and New South Wales during February. Coal shipments to Japan, India, China and Korea were hit particularly badly.

Although commodity volumes improved a little across some commodity classes, prices of all grades of coal and iron fell over the month.

Adam Boyton, an economist at Deutsche Bank, wondered whether "the weaker data had brought about an abrupt end to the 'super-sized' trade surplus from Australia’s resources boom".

Imports, especially consumption goods, also fell in February, down by 4 per cent on a month earlier, but economists had been expecting a fall in line with weakening domestic demand.

"This data is more evidence that the RBA needs to cut official interest rates," Citi economists said.

Yesterday, the Reserve Bank decided to keep the official interest rate on hold at 4.25 per cent, but it strongly suggested it would cut the rate next month if inflation remained under control.