Don’t believe all those gloomy China trade stories. The gloomsters went mad yesterday after the surprise 15% fall in Chinese exports in March took the headlines, helping the China bears to forecast themselves into a frenzy. A 12% fall in imports also added to the gloom and doom (ahead of China’s first-quarter GDP data tomorrow). But were the import figures so bad? For example, iron ore imports rose 9% in March from a year earlier to a healthy 80.51 million tonnes. But prices were down 45% on a year earlier, meaning a sharp fall in the value of iron ore imports. Oil imports fell in March as well, to 26.81 million tonnes. On a daily basis, March imports of 6.3 million barrels per day were down 5.2% from February. And oil prices were 46.8% lower than March 2014. There are a lot of figures in this item, but the point is that China’s demand for key global commodities remains very solid. It doesn’t fully explain the weak trade performance in March, but it provides an explanation on the imports side. And the fall in import prices continue to be reflected in the intense deflation gripping Chinese manufacturing, which is adding to the pressures from the weakening property sector.

On the export side there is some suggestion part of the fall could be to Chinese exporters boosting shipments in February ahead of the Lunar New Year break. For example, exports to the United States, European Union and Japan fell by 8%, 19.1% and 24.8% in March respectively, down from rises of 48.5%, 44.1% and 23.6% in February. That has happened in either January or February (and December) in years gone by as Lunar New Year moves around in January and February. The US, EU and Japan are China’s biggest export markets, so the big swings in growth from February to March is suggestive of front loading of exports by shippers. Not many people yesterday stopped to check on what happened in March 2014 — well in a surprise, exports fell 6.6%, imports fell 11.3% (which worried a lot of people at the time), and the trade surplus was US$7.71 billion after a trade deficit in February of that year. And if you go back to March 2013, there was a surprise trade deficit as exports rose by less than expected and imports rose by more than expected.  — Glenn Dyer

Iron ore up, Hong Kong bubbles higher. And then there’s the price of iron ore — up more than 3% on Monday night after the supposedly weak trade data from China resulted in a sell-off in Australia and other markets overnight. Shares in Fortescue Metals Group dropped to a new six-year low, closing at $1.78 yesterday. Australian iron ore (the global standard) traded at US$48.80 a tonne, up 3.2% from its prior close of US$47.30 a tonne on Friday night, and well above of the 10-year low of US$46.70 reached a week ago. Treasurer Joe Hockey warned yesterday the 2015-16 federal budget may factor in an iron ore price of US$35 a tonne for the coming year, a number well short of the government’s previous forecast of US$60 a tonne — and a sign of how battered Treasury has been by its consistent missing revenue target forecasts in the last four years. The rise overnight though could be yet another dead-cat bounce for the commodity, which is on everyone’s bear list to fall (Citi reckons US$30 a tonne is not out of the question). — Glenn Dyer

Duelling Beetles. They are two of the richest families in Germany. Now the related Porsche and Piech families are fighting over control of Volkswagen AG, Europe’s biggest car-maker, which is on the cusp of overtaking Toyota and General Motors. The split is over VW’s CEO, Martin Winterkorn, who was appointed to run the company last time there was a split almost a decade ago. Now chairman Ferdinand Piech says he has lost confidence in him — or as he told a German magazine last Friday, he is “at a distance to Winterkorn”. On the weekend the Porsche family, through Piech’s cousin, Wolfgang Porsche (and chairman of Porsche AG, which controls 50.7% of VW), made it clear his cousin’s view was his own and not that of the family. And the head of the VW union group and the Prime Minister of Lower Saxony, which controls another 20% of VW’s shares, have also come out in support of the CEO. Until now, it was thought that the Porsche and Piech families had agreed that Winterkorn, who is 67, would become the chairman of the non-executive supervisory board, when 77-year-old Piech retires, which he is expected to do in 2017. Now that is up in the air thanks to someone who doesn’t want to let go. It is all so very public and un-German behaviour (these sorts of dynastic disputes are kept within families and boardrooms). Now it is out in the open and as public as the latest VW ad on German TV. — Glenn Dyer

Peter Fray

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