Tensions fail to dent China iron ore needs

The value of iron ore shipments to China rose by seven per cent in June to a record $14.9 billion.
The value of iron ore shipments to China rose by seven per cent in June to a record $14.9 billion.

Relations with China may be at a low ebb but this hasn't dented its insatiable appetite for Australian iron ore, which reached another record in June.

Such demand helped lift Australia's goods trade surplus to a new peak of $13.3 billion, Australian Bureau of Statistics preliminary figures for June show.

"Australia's export market remains a vital cog supporting incomes, jobs and regional economies during the pandemic," Commonwealth Securities senior economist Ryan Felsman said.

"With the spread of the COVID-19 Delta variant prompting persistent lockdowns in Australia's capital cities, agricultural and minerals-related shipments to major trading partners takes on even greater importance."

At present, there are lockdowns in NSW, Victoria and South Australia, representing half of the Australian population.

The value of iron ore shipments to China rose by seven per cent to a record $14.9 billion, which was predominantly driven by price.

The iron ore price remains comfortably above $US200 per tonne.

That compares with Treasury's most recent forecast of an iron ore price of just $US55 per tonne by March next year.

"Exporter demand is set to be boosted by the weaker Aussie dollar, providing the federal government with a much-needed fiscal windfall,' Mr Felsman said.

Australia has been at odds with its number one trading partner for many months, which has seen China bringing a number of export commodities into dispute, including beef, barley and wine.

The political tensions, which first coincided with Australia calling for an inquiry into the origin of the COVID-19 pandemic in Wuhan province, took a new turn this week.

Australia has joined the US and other allies in accusing China of being behind a global cyber hacking campaign.

Overall, Australian exports ballooned eight per cent to $41.3 billion in June, with significant increases in metalliferous ores, coal, non-monetary gold and gas.

Exports of metalliferous ores reached $20.5 billion, marking a fourth consecutive record monthly increase and making up almost half of Australia's total exports.

Driving the increase was iron ore, with a record export value of $17.6 billion, followed by copper ore at $847 million.

The copper price increased by 37 per cent in June, reflecting demand for green technologies and limited supplies.

Imports to Australia also rose by eight per cent to $28 billion in June, led by a 51 per cent increase in fuel shipments.

This included a 45 per cent increase in diesel and a 46 per cent in crude oil, which the ABS said lifted petroleum imports back to pre-COVID-19 levels.

Australian Associated Press