China trade data lights a fire under miners

Fears of an economic hard landing in China were swept aside today as trade data lit a fire under iron ore miners and lifted the Australian dollar.

In terms of economic indicators, China’s trade figures have taken dominance if only for the fact they are harder to fudge than the official economic growth numbers.

Since the data dropped this morning, showing strong gains in both imports and exports during July, iron ore miners have leapt as much as 4%. Both imports and exports slipped into the red in June.

The major miners were treading water before the figures were released but soared immediately afterwards which confirmed that iron ore imports hit a record in July.

This occurred in a month when China’s economic growth was downgraded by external agencies such as the International Monetary Fund and Chinese officials.

Analysts have had difficulty reconciling the GDP estimates – indicating a slowdown – and iron ore prices, which not only have maintained strength but trended higher to around $132 a tonne.  Most analysts had pencilled in prices of $US120 a tonne with some bears pointing to prices below $US100.

Just how much of the increase in iron imports was related to restocking is difficult to determine. Most Australian iron exporters have ramped up production in 2013 and should reap the benefits of the higher prices in the upcoming results and into the current financial year (see Tim Treadgold's Is it iron curtains for small producers?). 

Rio Tinto, due to report this afternoon, saw its shares jump more than 2% immediately after the figures were released.