Trade fig­ures re­veal how vul­ner­a­ble trad­ing economies are to Asian na­tion’s whims

CityPress - - Business - DE­WALD VAN RENS­BURG de­wald.vrens­burg@city­

S outh Africa’s siz­able coal ex­ports to China have abruptly dropped to vir­tu­ally noth­ing since March this year, re­flect­ing how quickly the world’s ma­jor com­mod­ity im­porter can af­fect the for­tunes of trad­ing part­ners like South Africa. The re­cent de­te­ri­o­ra­tion of South Africa’s trade bal­ance stems almost en­tirely from fall­ing prices for the bulk com­modi­ties that are mostly ex­ported to China.

The lat­est trade data from the depart­ment of trade and in­dus­try shows that China’s im­ports of South African coal has dried up com­pletely – an ap­par­ent ef­fect of China’s eco­nomic slow­down pre­dat­ing the new pro­tec­tion­ist mea­sures against coal im­ports, which China an­nounced this week.

In the first eight months of this year, China im­ported 3.3 mil­lion tons of South African coal.

That is less than half of the 7.5 mil­lion tons it had im­ported in the same pe­riod last year.

That, how­ever, ob­scures the dra­matic drop – from April on­wards, there have been almost no coal ex­ports to China at all.

Coal is the only bulk min­eral where China was not South Africa’s ma­jor cus­tomer, although its role had been rapidly grow­ing since 2009.

China’s coal im­ports from South Africa went from ba­si­cally nil to 17% of all coal ex­ports be­tween 2009 and 2011 (

Over­all, South African ex­ports of coal have not dropped much, and ba­si­cally all the coal that went to China seem­ingly found buy­ers in In­dia.

Usu­ally, South Africa’s ex­ports of coal, iron and man­ganese more or less cover the coun­try’s oil im­ports, largely from Saudi Ara­bia, Nige­ria and An­gola.

In Au­gust, they fell well short, drop­ping from July’s R20.9 bil­lion to R15.9 bil­lion.

The cul­prit is iron ore. South Africa has been re­ceiv­ing on av­er­age $107 a ton this year up to the end of Au­gust, com­pared with $131 a ton last year.

Man­ganese ore has been fetch­ing about $140 a ton com­pared to $166 last year.

The go­ing price for ther­mal coal has dropped from $76 to $66. All th­ese com­modi­ties are largely sold to China. The weak rand has sig­nif­i­cantly cush­ioned the blow after ex­ports of the bulk com­modi­ties to China fell by dou­ble dig­its in dol­lar terms this year.

China has been cut­ting back its coal im­ports gen­er­ally and South Africa hap­pens to be one of the most ge­o­graph­i­cally re­mote among the coun­try’s top sup­pli­ers.

The coun­try this week rein­tro­duced the im­port tar­iffs of 3% to 6% on dif­fer­ent qual­i­ties of coal it had scrapped in 2007. This is to pro­tect China’s do­mes­tic coal com­pa­nies and fol­lows a new ban on par­tic­u­larly low qual­i­ties of coal an­nounced last month as part of China’s at­tempt to curb the pol­lu­tion in its ma­jor ci­ties.

The trade in bulk com­modi­ties be­tween South Africa and China might be sig­nif­i­cant in terms of our trade bal­ance, but it is rel­a­tively tiny in the con­text of China’s im­ports of th­ese com­modi­ties over­all.

The coun­try that has the most to lose from the fall­ing prices and new Chi­nese re­stric­tions is Aus­tralia, which has be­come vir­tu­ally a com­mod­ity sup­ply­ing colony of China over the past decade. Its ex­ports largely con­sist of iron ore and coal shipped to Chi­nese steel mills.

Over the past few years, Chi­nese coal im­ports from Aus­tralia have surged from 33 mil­lion tons to almost 90 mil­lion tons.

Both the new tar­iff and the re­stric­tions on dirty coal are es­sen­tially aimed at re­mov­ing this Aus­tralian coal from the Chi­nese mar­ket.

This will ben­e­fit In­done­sia, which is presently China’s sec­ond largest coal sup­plier. The coun­try is and im­mune to the new tar­iffs be­cause it is a mem­ber of the Asean trade bloc, which has a free trade agree­ment with China.

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