Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Sunday, 9 October 2016

Export volumes to crunch out records in Q3?


It's rather too early to say for certain, of course, given that the detailed trade figures have not yet been released for the final month of third quarter.

However, it does look to me as though export volumes will smoke a few records in Q3.

We already know that LNG exports from Gladstone Port rose by +5 per cent to hit a record high of more than 1.5 million mt in the month of August, backed up by a new record of 1.56 million mt in September.

China (660,541 mt), Japan (336,694 mt), and South Korea (310,782 mt) were the three key export destinations last month.

Volumes from the port are expected to fly higher by another +30 per cent in 2016-17.

More pertinently, Australia's total exports of the super-chilled commodity are forecast to triple between 2015 and 2021.

More than $200 billion has been invested in Australian LNG projects over the past decade, with a massive ramp up in production now to follow over the next five years, which will in turn be a significant boost both real and nominal GDP growth.

Of course while low oil prices lead to cheaper fuel at the bowser (hurrah!), lower oil prices are simultaneously a negative for LNG prices (boo!), given that the bulk of our exports are produced under long term contracts that are broadly linked to the price of oil.

If ever there was a reason for Australia to hope for higher oil prices, this is it!

MOAR records in the Pilbara

Meanwhile, iron ore exports from Port Hedland have also notched record highs of late.

According to the Pilbara Ports Authority, iron ore cargo of 41.84 million tonnes was shipped in September, with China alone accounting for 35.54 million tonnes, its highest ever sweep.

September is a typically a shorter month than August - by about 24 hours at any rate - so it's not really a surprise that the aggregate volume of exports was tad lower last month, but across the quarter total iron ore cargo shipped of 123.4 million tonnes was easily a record. 

We already know from the Reserve Bank's Index of Commodity Prices - which increased solidly in SDR terms in both August (+1.9 per cent) and September (+1.9 per cent) - that the terms of trade are likely to record a welcome boost in the September quarter too. 

So not only should GDP and GDP per capita get a decent leg up, national income will too.

Alas, we'll all just have to find something else to whinge about this time around (immigrants probably). 


The week ahead

A wholesale raft of interesting news due out this week, including overseas arrivals and departures, building activity, lending finance, and notably housing finance, which is expected to reveal another moderate decline in the number of owner-occupier approvals, driven downwards by resources-impacted regions. 

The Housing Finance release for August will at last include revised first homebuyer statistics, but alas no detail on first time investors. 

The Building Activity figures for Q1 2016 showed a lag in the number of dwelling completions, but record high annual dwelling commencements (as well as an utterly unprecedented number of attached dwellings under construction).

Stay tuned, because the release for the June quarter is going to be an absolute ripsnorter.