Despite it all, China dominates Australian trade – again

China has reasserted its dominance over Australia’s export markets, taking a record of almost 1 billion tonnes of mineral resources and agricultural commodities last year, and displacing the trading partners that helped Australia out during the years it suffered Chinese economic punishment.

An extraordinary 63 percent of Australia’s export shipping was destined for China last year, matching the record set in 2019-20 before China started imposing bans on select Australian commodities.

The value of trade matters more for the economy than the volume. But as sea-freight tonnage is of strategic importance, as it dictates the density of traffic on our sea lanes.

The Bureau of Infrastructure and Transport Research Economics (BITRE) has provided ASPI with measures of Australia’s maritime trade, based on unpublished data from the Australian Bureau of Statistics. BITRE also supplied the source data for a 2024 ASPI report on the economic security of Australian trade routes.

BITRE data shows that the 973 million tonnes shipped to China in 2023-24 were 113 million tonnes ahead of the level in 2021-22, when the export bans were at their peak.

By contrast, shipments to other trading partners fell during the past two years: shipments to Japan fell by 28 million tonnes; Korea by 26 million tonnes; India by 10 million tonnes and Taiwan by 13 million tonnes. Increases in sales to these nations collectively offset about half of the fall in Chinese shipments during its coercion campaign between 2020 and 2022.

China’s primacy reflects the flow of commodity markets to the point of greatest demand. Shipments to China are almost five times larger than those to Japan (Australia’s next-largest export market), 10 times larger than those to Korea and 20 times larger than shipments to India and Taiwan.

The skew to China is less acute when measured by value rather than tonnage, but the trend is the same. China’s share of Australia’s maritime export earnings hit 41 percent last year, having recovered from a low of 34 percent in 2021-22. It is still short of the peak in 2019-20, when soaring iron ore and coal prices lifted China’s share of Australia’s seaborne export revenue to 49 percent.

China’s contribution to Australia’s maritime export revenue far larger than the export value shares held by Japan (16 percent), Korea (7 percent) or India and Taiwan (4 percent each).

BITRE’s estimates underline the pivotal nature of Australia’s trade routes to the north. China, East Asia and Southeast Asia take 92 percent of maritime exports by tonnage and 81 percent by value.

Those suggesting that Australia would diversify its trade in a conflict should take into account the miniscule share that is directed to Western partners in peacetime. By weight, only 0.4 percent of maritime exports goes to North America, while 1.7 percent goes to Europe. By value, the shares are 3.5 percent each.

Australia’s exports of both agricultural and mineral resources are shipped in bulk carriers. BITRE has estimated vessel and port call numbers based on data from shipping information provider Lloyd’s List Intelligence. They show 4317 bulk carriers made 11,375 trips to Australia in 2022-23.

China’s demand for Australia’s two principal commodities—iron ore and coal—involves shipping about 16 million tonnes every week, requiring an effective maritime conveyor belt of hundreds of bulk carriers to keep its steel mills supplied.

The same is true on a smaller scale with Australia’s liquefied natural gas exports, supplying customers in China, Japan, Taiwan and Korea. In 2022-23, 211 carriers of liquefied natural gas made 1,112 port calls to Australia.

By value, minerals and energy account for 79 percent of Australia’s sea freight export revenue, having risen sharply over the past decade from 67 percent. The rise of resources has come at the expense of agriculture (including wine), which has dropped from 14 percent to 11 percent and manufacturing, down from 13 percent to 8 percent.

There has been no growth in the value of Australia’s exports of manufactured goods in the past 10 years, which have remained at $38 billion a year, adjusted for inflation.

Imports of manufactured goods, by contrast, have risen by 34 percent in that time to $245 billion, again adjusted for inflation. They account for 73 percent of Australia’s maritime imports by value, while oil and fuels account for a further 18 percent.

As an exporter of commodities and an importer of manufactured goods, Australia receives an average of $300 a tonne from its exports but pays $3,000 a tonne for its imports.

Relative to the thousands of bulk carriers taking Australia’s exports, its imports of manufactured goods are brought by several hundred container ships, car carriers and general freighters. In 2022-23, 366 container ships made a total of 1,624 trips to Australia, with most stopping at two or three ports. A further 226 general freighters made 538 trips to Australia. The 1.2 million motor vehicles sold in Australia are all imported. In 2022-23, 245 car carriers made 453 trips.

The origins of Australia’s seaborne imports are more diverse both in content and destination than exports. Statistics from the Department of Foreign Affairs and Trade show that Australia’s top ten commodities make up 73 percent of total exports while in the other direction, the top ten items make up only 42 percent of imports. About 20 percent of imports are carried by air, rather than ship, compared with just under 9 percent of exports.

China remains Australia’s largest supplier by far as the source for 27 percent of maritime imports by value. While its share has dipped from 30 percent since 2020-21, this is likely due to the lack of inflation in Chinese electronic and telecommunications goods relative to other imports, rather than any strategic diversification by Australia.

The United States, Korea and Japan each account for between 7 and 8 percent of Australia’s imports. Asia is the source for 66 percent of imports by value, while 15 percent comes from Europe and 10 percent from the US.

Defence strategists contemplating the possibility of conflict with China would prefer Australia depended less upon it for our export markets and supply lines and would also urge a diversification away from Asia and the vulnerable sea lanes to our north. They would also seek to reduce dependence on offshore manufacturing by building greater local capability.

However, the imbalances evident in Australia’s maritime trade are so great that it is not realistic to envisage any material change, at least in the next decade. This is the economy we have to live with.  It has delivered one of the highest living standards in the world—among nations with more than 10 million people, only the US has a higher income per capita—but it comes with insoluble strategic challenges.

This article was published by The Strategist.