Australian Export Prices Plummet as Demand Drops for Key Commodities, Import Prices Show Modest Decline Amid Global Economic Uncertainty

In the latest release of the International Trade Price Indexes for Australia, data for the reference period of June 2023 shows significant changes in export and import prices. The Export Price Index recorded a notable fall of 8.5% during the quarter and a substantial 11.2% decline through the year. This drop in export prices can have far-reaching implications for the Australian economy.

The main contributors to the decline in export prices were identified as follows:

  1. Coal, coke, and briquettes: This category experienced a sharp decrease of 20.6%, primarily driven by lower demand for both thermal and metallurgical coal. The easing of global supply constraints, coupled with a decline in demand, has put significant pressure on the coal industry.
  2. Gas, natural and manufactured: Prices in this category fell by 20.9%, mainly due to a decrease in oil-linked contract prices and high inventories in Europe, which led to a downward trend in spot prices.
  3. Metalliferous ores and metal scrap: This category saw a decrease of 6.2%, primarily caused by a decrease in iron ore demand from China. The slowdown in China’s manufacturing and construction sectors played a role in reducing demand for iron ore.
  4. Crude fertilizers and minerals: Prices in this category fell by 5.8%, largely due to a decline in lithium prices. The cessation of subsidies on electric vehicles by the Chinese government in early 2023 impacted the demand for lithium.

However, there were some offsetting contributors to the decline in export prices:

  1. Gold, non-monetary: This category experienced a significant increase of 6.4%, as demand for the safe-haven asset surged amidst ongoing geopolitical and economic uncertainties.
  2. Sugars and Honey: Prices in this category saw a notable rise of 19.1%, driven by adverse weather conditions affecting sugar production in major producing nations. This surge in demand led to an increase in the price of Australian sugar.
  3. Meat and meat preparations: This category experienced a modest uptick of 3.8%, showing a small recovery in demand from the lows experienced in the previous quarter. Additionally, a depreciating Australian Dollar provided some support to this increase.

Turning to import prices, the Import Price Index also experienced a decline, but it was comparatively milder, with a 0.8% decrease during the quarter and a 0.3% decline through the year.

The main contributors to the fall in import prices were identified as follows:

  1. Petroleum, petroleum products, and related materials: This category saw a notable decrease of 7.0% due to global recession fears leading to a contraction in demand for oil.
  2. Fertilizer (excluding crude fertilizers): Prices in this category fell by 16.4%, largely driven by falling prices for natural gas and ammonia, which are crucial inputs in production processes.
  3. Chemical materials and products: This category experienced an 8.2% drop in prices, primarily driven by falling prices of global insecticides and herbicides as supply chains normalized and input costs moderated.

On the other hand, there were some offsetting contributors to the decline in import prices:

  1. Specialized machinery: Prices in this category rose by 5.6% due to annual price reviews reflecting strong inflationary pressures and increased input costs throughout 2022. A depreciating Australian dollar further supported this increase.
  2. Gold, non-monetary: As seen in the export prices, gold experienced a rise of 7.2%, driven by stronger demand for the safe-haven asset amid geopolitical and global economic uncertainties.