shutterstock_102315979_1600x420.jpg

Cyclone Debbie curtails Aussie coking coal exports but stronger global trade should support broader commodity exports

In the April edition of Efic’s World Risk Developments, we look at the impacts of Cyclone Debbie on coking coal exports; whether stronger world trade growth will boost Australian commodity producers; and the potential for US trade policy diversification.

Coking coal prices doubled in the last few weeks driven by supply disruptions in Queensland due to tropical Cyclone Debbie. “Key rail lines have been damaged reportedly forcing BHP and Glencore to declare force majeure on coking coal shipments outside of Australia,” says Cassandra Winzenried, Chief Economist at Efic.

Winzenried says that estimates suggest about 12m tonnes of coking coal could be affected, with China likely to look at other markets to fill the supply shortfall.

Meanwhile, robust industrial activity is providing the impetus for stronger global trade, which should support Australia’s commodity exports. “When you strip out the impact of volatile commodity prices, trade volumes growth has improved significantly,” says Winzenried. “This is supported by robust manufacturing output in both advanced and emerging economies.”

Where does this leave Australian commodity producers? Winzenried says Australia’s export data has been robust, with export receipts growing at double digit pace, led by stronger resource exports. “Upbeat sentiment data suggests the improving global trade trends should continue over the coming months.”

In the US, the Treasury told Congress this month that China does not meet the criteria for currency manipulation. “Specifically, China does not meet Treasury’s third benchmark, which is repeated purchases of foreign currency that amount to more than 2% of GDP,” says Winzenried.

As such, Winzenried says the Trump administration’s trade agenda is expected to diversify to other countries, with the latest Executive Order to probe the cause of significant deficits with 16 trade partners. “Australia should avoid attention given the persistent trade surplus the US has run with Australia for several decades,” says Winzenried.

Other topics canvassed in this month’s edition of World Risk Developments include:

• Turkey—transitions toward autocratic rule
• Thailand—forcible closure of gold mine sours investment climate
• South Africa—cabinet reshuffle increases political risk
• Iran—weak economy undermines President Rouhani ahead of polls
• Vietnam—rising middle class provides export opportunities

Read the full April edition of Efic’s World Risk Developments now.

Please direct any media enquiries to media@efic.gov.au