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The lithium pull eases.
07/06/2023 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

A trade surplus of USD 1.0 billion was registered in May, above the USD 0.3 billion in May last year as imports remain weak. While the trade surplus remained large, it was below market expectations (Bloomberg market consensus and our call of USD 1.5 billion). Total exports fell by 10.8% YoY (3.1% drop in April), as the 6.9% rise in copper exports was offset by a significant decline in lithium (-69% yoy; driven by both price and volume declines) and weaker manufacturing sales (amid more challenging base effects). Meanwhile, total imports continued to contract at double digit rates (down 18.9% YoY, similar to the drop in April), with large drops in durable consumer goods (-33%), energy (-25%), and capital goods (-13%; +0.1% in April). The 12-month rolling trade surplus rose to USD 12 billion, from USD 10.3 billion as of March and USD 3.8 billion in 2022. At the margin, our seasonal adjustment shows the trade surplus at USD 17.9 billion in the quarter ending in May (annualized; USD 24.3 billion in 1Q23; USD 12.8 billion surplus in 4Q22).


Exports weakened in the quarter as the lithium pull eases. Exports contracted by 0.1% YoY during the quarter, reverting from the 11% rise in 1Q23. The result was pulled down by the contraction of industrial (0.2% fall) and agricultural exports (3.2% down), and a weaker pull from mining (+0.4%, down from +8.6% in 1Q23). Sequentially, exports decreased 7.1% qoq/saar (+16.8% in April; +29.3% in 1Q23). Lithium exports in the quarter ending in May are down 31% YoY from last year, with export volumes essentially stable. 


Non-energy imports continue to fall sequentially. Total imports contracted 17.7% during the quarter ending in May (16.2% fall in 1Q23). Consumer goods imports fell 31.1% (similar to the drop in 1Q23), with durable goods imports falling 36.4%. Capital goods imports fell 11% YoY (in line with the 1Q23 drop), dragged by transportation equipment. Meanwhile, energy imports fell  10.3%, dragged by diesel. At the margin, imports rose 1.3% qoq/saar (-21% in 1Q23), the first increase since the July quarter. Nevertheless, excluding energy, imports fell 3.7% qoq/saar (-24% in 1Q23). 


The ongoing domestic demand correction, along with still high copper prices and lower global transportation fees, is consistent with a significant CAD correction this year, to 3.8% of GDP, from 9.0% last year. However, a further moderation in lithium prices, and a slower growth in China, may pose risks to the pace of the correction.