Iron ore is one of Australia’s primary exports and China our most important customer – but just how important China is relative to the rest of Asia was put in stark contrast by David Scutt from Arab Bank yesterday. He tweeted this very interesting chart of iron ore exports:
It shows just important Australia’s ties with China and Chinese growth really are.
But good news from Westpac’s currency team on this front yesterday, who noted that even though iron ore spot prices were flat, exports were strongly higher, as Scutt’s chart implies.
Iron ore prices have been very resilient and as we have pointed out repeatedly, export volumes are very strong, with Oct shipments from Port Hedland WA setting a new record high of 28.9mn tonnes, up 33% y/y. This ensures strong export revenues in Q4.
Many worry about Australia’s over-reliance on China and Chinese growth, but as the past 5 years have shown, there is no better growth engine to be tapped into.
So as the domestic economy starts to respond to low interest rates, this big pick-up in iron ore exports is great for the economy.