China Double-Dip To Hurt Exports

Exports to China accounted for some 13.2% of total exports in January-April 2010, a 27% y-o-y increase. We particularly note the rise in crude oil exports, with China, the US and interestingly St Lucia being the top three oil export markets for Brazil during this period. While oil exports keep rising the recent drop off in iron exports to China is a concern. Accounting for 9.2% of total Brazilian exports, iron is the second most important export commodity for Brazil, after crude oil. Indeed, iron exports to China made up almost 4% of total Brazilian exports in January-April 2010, and accounted for almost 30% of total exports to China. The decline in Brazilian iron orders from China, therefore, marks an ominous sign for Brazilian exporters. Strong Chinese demand for iron over the course of 2009 played a critical role in helping Brazil emerge out of recession last year. Prospects for a 'double-dip' in China, therefore, raise considerable risks for Brazil's export sector.

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