Australia’s overall earnings from exporting commodities to China declined in the last quarter of 2015 due to sharp falls in prices.
China’s demand for some imported raw materials remained “robust”, but increased supply kept prices down, according to the China Resources Quarterly (CRQ), produced by the Australian government.
Despite falling steel production, China’s iron ore imports increased by 9% and Australia’s iron ore export volumes into China grew by 7% to 162m tons between October and December last year.
But export values fell to AUS$9bn, the lowest since the first quarter of 2010, according to the report, produced by the Department of Industry, Innovation and Science (DIIS) and Westpac Institutional Bank.
While prices stay this low and bulk export volumes continue to increase, pressure will grow on Australian mines and other commodity producers, the report stated.
Reduced domestic building activity, less external demand for Chinese-produced goods and struggling heavy industry are some of the reasons behind China’s weakened economy, according to the report.
In the three months to the end of 2015, China’s imports of thermal coal declined by 28% to 36m tons and Australia’s exports to China decreased by 39% to 6.8m tons, while values declined by 45% to AUS$390m.
One area of the Chinese economy which remained strong in 2015 was the services sector, which grew by 12% in the quarter four, due to stronger demand from Chinese consumers.
“China’s domestic demand profile remains fragile and exports are falling. In the resources sphere, the intersection of increasing Australian supply potential and the fact that it is the most resource and energy intensive parts of the Chinese economy that have slowed the most, has produced steep declines in the prices of a number of important commodities,” said the report.
Mark Cully, chief economist at the Department of Industry, Innovation and Science, said China now has the world’s largest national economy in purchasing power parity terms and is the largest producer of industrial value added.
“These observations underscore the value of continuing to deepen our collective understanding of the ever-evolving Chinese economy,” he said.