Trade surplus narrows as commodity prices drop

December 12, 2011

The monthly trade surplus narrowed more than expected in October to its smallest since March as demand for commodities from China faltered.

The trade surplus narrowed to $1.59 billion from $2.56 billion in September, according to the Australian Bureau of Statistics. Economists polled by Bloomberg expected the trade surplus to fall to $2 billion.

"It could be the first sign of a weakness for demand for commodities from China but a lot will depend on how Europe evolves," said St George Bank chief economist Besa Deda. "We think the weaker commodities prices and the relative strength of the Aussie dollar, combined with strong demand for capital goods imports probably means we've seen the peak of the surplus."

The ABS said iron ore fines exports to China, on a recorded trade basis, fell $110 million or 3 per cent in October. Volumes for lump iron ores were up 6 per cent but prices fell 9 per cent.

The fears of a steep recession in Europe have weakened demand for Chinese exports which in turn is hurting Australian sales into China.

The Australian dollar fell after the release of the trade figures and a separate report on housing finance, losing about one quarter of a US cents to about $US1.017 in recent trade.

China effect

Ms Deda noted that China recently began easing policy in response to the impact of the European debt crisis and economic slowdown in China. Europe is China's biggest export market.

Rural goods, seasonally adjusted, rose 2 per cent to $3 billion in October.

Ms Deda said St George is still forecasting healthy trade surpluses to come, especially with Queensland's coal industry's production improving after the floods at the beginning of the year however the peak of the surplus has probably passed.

In seasonally adjusted terms, non-rural goods exports edged up $14 million to $19 billion in October, helped by mineral fuels which rose $144 million, or 7 per cent in the month.

Manufactured goods exports, however, fell $84 million, or 6 per cent, while coal, coke and briquettes shipments abroard fell $75 million, or 2 per cent.

Goods and services imports rose 2 per cent, or $605 million, to $25.7 billion in October, with capital goods rising $60 million or 1 per cent.

"We had a big rise in capital goods imports coming through that is reflecting the strong business investment boom," Ms Deda said.

Import boost

Moody's Economy.com analyst Matthew Circosta said demand for exports is weakening and that the trade surplus would continue to narrow.

"Softer commodity prices are flowing through to lower export receipts, while strong business investment and household consumption are boosting imports."

"Recent interest rate cuts will support domestic demand, which along with the rampant mining boom, will continue lifting the import bill and narrow the trade surplus," said Mr Circosta.

HSBC chief economist Paul Bloxham said rising imports are consistent with the solid domestic demand in the Australian economy.

"Some (demand) is leaking offshore, given the elevated level of the Aussie dollar," he said.

Mr Bloxham said the leakage is not just around online retail shopping but investment in the mining boom, which includes the surge in equipment imports.

Lumps, fines, coal

In October the price of iron ore plunged by 30 per cent, to about $US120 a tonne, as Chinese steel mills slowed production. Iron ore prices have since recovered to be about $US140 a tonne.

Exports of the premium lump iron ore to China fell $23 million, or 2 per cent, with volumes rising 8 per cent in the month while prices fell 10 per cent.

Hard coking coal exports to China fell 19 per cent, in the month, but rose 9 per cent to Japan and 11 per cent to India. Overall, hard coking coal exports fell 4 per cent, $79 million, in the month.

Semi-soft coal exports to China sank 50 per cent in October, by $107 million, with volumes down 47 per cent and prices 6 per cent lower, the ABS said.

Thermal coal exports to China rose $47 million, or 25 per cent, with volumes up 23 per cent, and prices up 1 per cent.

Sourced smh.com.au

Indonesia Stocks Movers: Adaro Energy, Garuda, Indosat, Timah

Monday, October 31, 2011

Oct. 31 (Bloomberg) -- Shares of the following companies had unusual moves in Indonesian trading. Stock symbols are in parentheses and prices are as of the close in Jakarta.

The Jakarta Composite index fell 1.0 percent to 3,790.85, slid for the first day .

Coal producers: PT Bumi Resources (BUMI IJ), Indonesia’s biggest coal producer, dropped 4.1 percent to 2,350 rupiah. PT Adaro Energy (ADRO IJ), second-largest coal mining company, fell 4.7 percent to 2,025 rupiah.

Power-station coal prices at Australia’s Newcastle port, an Asian benchmark, dropped 0.2 percent in the week ended Oct. 28. Coal prices at the New South Wales port declined to $117.89 a metric ton from $118.10 the previous week, according to the globalCOAL NEWC Index.

Nickel producers: PT International Nickel Indonesia (INCO IJ), the nation’s largest producer of the metal, dropped 2 percent to 3,650 rupiah. PT Aneka Tambang (ANTM IJ), the second- biggest, fell 2.2 percent to 1,790 rupiah.

Nickel for three-month delivery dropped 1 percent to $19,700 a metric ton on the London Metal Exchange on Oct. 28 and last traded at $19,400.

PT Buana Listya Tama (BULL IJ), an Indonesian provider of freight transportation services, advanced 4.6 percent to 114 rupiah after the company reported nine-month net income jumped to 250.64 billion rupiah from a year earlier.

PT Garuda Indonesia (GIAA IJ), Indonesia’s biggest carrier, climbed gained 2.3 percent to 445 rupiah as crude oil futures fell for a second day in New York, reducing fuel-cost pressure on the Indonesian airline.

PT Indosat (ISAT IJ), an Indonesian telephone company, rose 1.9 percent to 5,350 rupiah after the company reported nine- month net income rose to 992 billion rupiah ($112 million), from 530.9 billion rupiah a year earlier.

PT Timah (TINS IJ), Indonesia’s largest tin mining company, dropped 1.7 percent to 1,990 rupiah. Fifteen tin producers in Indonesia, the world’s largest shipper, agreed to extend a self- imposed ban on exports until the end of the year to help boost prices. They will seek to widen support for the halt at a meeting this week.

(sourced Bloomberg)

Asia Coal-China demand in focus as power shortages loom

Thu Jun 2, 2011 10:35am GMT

By Rebekah Kebede

PERTH, June 2 (Reuters) - Asia's thermal coal markets were focused on Chinese demand as the world's largest coal consumer faces what is expected to be the worst power shortage in years.

Chinese buyers have been in the market for both Indonesian and Australian coal as domestic prices in the world's largest coal producing country have shot up.

But Australia's thermal coal prices, a benchmark for Asia, were still slightly lower on the week with the globalCOAL Newcastle index closing at $118.86 on Wednesday, a dollar down from a week ago.

China's daily prices for coal with a heating value of 5,500 kcal/kg NAR were 845 yuan ($130.43) per tonne on Thursday, according to industry data website SXCOAL (www.sxcoal.com).

"Because everybody else has secured their requirements right now, everybody is focused on what incremental prices China is willing to pay for lower-calorific Indonesian and the tailings and washings out of Australia," one Singapore-based source said, referring to Newcastle coal which does not meet the standard export specifications.

China said on Wednesday that it would encourage imports, which typically only enter the country when China's domestic coal prices are high enough to make economic sense.

Chinese demand for Indonesian coal, however, was seen slightly lower during the past week.

"They have bought quite enough low-grade coal from Indonesia- now they are trying to find some higher-grade coal to blend. Australia is the most economical source," another Singapore-based market source said.

Most recently, Chinese buyers secured a cargo of 4,900 kcal/kg Indonesian coal for $89 per tonne FOB, a couple of dollars cheaper than deals done late last week, the source said.

WEEK AHEAD

Japan's coal demand outlook will also be in focus, with Xstrata , the world's largest exporter of thermal coal, visiting Japan next week to negotiate an annual supply contract beginning July 1.

Although the supply contract beginning in July is for far less tonnage than the April contract, which serves as a yearly price benchmark, the negotiations may provide an indication for how well utilities are recovering from the March 11 earthquake.

Major utilities Tokyo Electric Power and Tohoku Electric were forced to declare force majeure on some coal shipments after some power plants were knocked offline due to the earthquake and tsunami.

A Sydney-based trader said the settlement price for the July contract may be similar to April's price of $129.85 per tonne, but others disagreed, saying lower demand due to the Japanese earthquake would depress prices.

"I wouldn't be surprised if they settle at $125 per tonne," one trade source said. ($1 = 6.479 Chinese Renminbis) (Editing by Himani Sarkar, sourced Thomson Reuters)

Xstrata, Chugoku settle FY2011 thermal coal contract at $130/tonne

Thu Mar 31, 2011 11:21pm GMT

PERTH, April 1 (Reuters) - Xstrata and Chugoku Electric have settled the Japanese annual coal contract for the Japanese fiscal year starting April 1 at a record level of around $130 per tonne, sources told Reuters Friday.

The settlement price exceeds the 2008 record of $125 per tonne is also considerably higher than the annual contract price of just under $100 set in 2010. (Reporting by Rebekah Kebede,sourced Reuters)

Australia thermal coal prices steady

8 Mar 2011 , 9:00 PM,

Australia's thermal coal prices, a benchmark for Asia, were steady last week in a quiet market as most players waited on the sidelines for the settlement of the Japanese annual thermal coal contract.

Thermal coal on the globalCOAL Newcastle index for the week to date was $US130.75 per tonne on Monday, relatively unchanged from $132 a week earlier and up slightly from $129.48 on Friday.

"It's hard to tell if there's any movement in the current period, it's a little bit quiet, the price is quite stable," one Sydney-based trader said.

Large Japanese utilities Tokyo Electric Power Co (TEPCO), Tohoku Electric Power Co Inc and Chubu Electric , negotiate April-to-March fiscal year thermal contracts with Xstrata, the world's largest exporter of thermal coal.

The contracts are generally around spot price levels, often with a supply security premium.

"Overall, the market is still tight in the Pacific, so miners have a strong negotiation position," one Singapore-based trader said.

Trade sources said that bids and offers stood about $US10 apart, with Xstrata said to be offering a price of $US140 per tonne and Japanese utilities countering with a $US130 per tonne bid.

Although still far apart, the parties were closer than a few weeks ago when the offer was said to be at $US145 per tonne, with utilities saying they would only be willing to pay $US125 per tonne.

Chinese demand for imported coal continued to be thin, with supplies in the world's number one producer and consumer of coal outstripping demand.

Chinese coal with a heating value of 5,500 kcal/kg was flat at 770 to 780 yuan.

As coal prices in Australia have risen, the arbitrage between Chinese coal prices and Australian imports are at the widest since September 2008.

Indian buyers were back in the market for Indonesian coal, traders said, with deals for 4,900 kcal/kg done for around $US80 per tonne.

Week ahead

Xstrata will head to Japan next week to meet Japanese utilities and all eyes will be on the annual contract talks, which are often used as a benchmark for other deals.

The market will also continue to watch for increasing demand from China and India. (Reuters)

Tags : globalCOAL NEWC Index, benchmark for Asia, Newcastle index, spot prices

Asia Coal-Australia thermal coal prices up over $127/tonne

By Rebekah Kebede
PERTH Wed Feb 2, 2011 1:35pm IST
(Reuters) - Australia's thermal coal prices, a benchmark for Asia, climbed to more than $127 a tonne week to date, supported by the ongoing impact of floods in Queensland state on coal supplies.
Thermal coal on the globalCOAL Newcastle index for the week to date was $127.88 per tonne on Tuesday, up from $124.44 a week earlier and up more than $5 from $122.98 on Friday.
"It's definitely very tight. The floods have had their impact, no doubt about it. It's tight on the ground and most people feel it," one trade source said.
"It seems to be tight everywhere - I don't think there are any coal-producing basins globally that are not tight and it's obviously reflected in the price," the source said.
With supplies scarce and the start of the Chinese New Year, however, traders said that actual deals done were few and far between.

"I'm not actually sure how much physical has been done out of there," a Sydney based trader said. "There aren't that many physical tonnes to be traded."
The market was also keeping a close eye on Cyclone Yasi, which was barreling toward Queensland's northern coast and expected to land on early Thursday.
Floods in Queensland have already caused about 5.5 million tonnes of Australian production to be lost, according to a Reuters poll conducted last week.
Although Queensland produces mostly coking coal used for steelmaking, it does produce some thermal coal and any more severe weather could cause further production losses and reduce supplies.

Xstrata has already shut its 6 million tonne per annum (mtpa) Collinsville mine, which produces both coking and thermal coal, ahead of the cyclone. The company is also considering shutting its Newlands mine, which produces 11 mtpa of thermal and coking coal for export.
Supplies from neighboring Indonesia are also expected to be restricted with some Indonesian coal traders have declared force majeure after a trade rule change, with around 60-70 vessels stuck in various ports and 3.5 million tonnes unable to be shipped.
WEEK AHEAD
The market will continue to monitor Cyclone Yasi and watch for impacts to both coal mines and infrastructure. Any further coal disruptions could spark another price rally in thermal coal.
In the wake of the Queensland floods, thermal coal prices climbed nearly 30 percent to over $140 per tonne in mid-January from about $110 per tonne at the beginning of the year.
With supplies tight, market players will be looking for Japanese, South Korean, and Taiwanese utilities to begin looking for supplies later on in the year. (sourced:reuters)