China’s imports of major commodities are starting to show a divergence between robust energy and somewhat softer industrial metals, which may show some of the impact of the ongoing trade dispute with the United States.
Crude oil imports rose 11.5% in October from a year earlier to a record high of 10.72 million barrels per day (bpd), according to customs data released on Nov. 8.
The undimmed appetite of the world’s largest crude importer is partially a reflection of the start-up of new refineries, demand from smaller, independent plants as well as increased exports of refined fuels.
It’s also likely that crude imports are being boosted by the ongoing buildup of both commercial and strategic storages.
Crude imports for the first 10 months of the year were 9.06 million bpd, up 820,000 bpd from the 8.24 million bpd from the same period last year.
This means that China is accounting for more than 80% of the expected global growth in crude oil demand this year, given the latest International Energy Agency estimate was for world demand growth of just 1 million bpd.
Imports of natural gas via pipelines and as liquefied natural gas (LNG) dropped to 6.52 million tonnes in October, down 20.6% from September and 10.6% from October last year.
However, imports are still up 7.9% in the first 10 months of the year and the October drop was most likely a result of the closure of the Rudong import terminal since late September.
The terminal, one of the three largest in China, can import 6.5 million tonnes of LNG a year and it is expected to return to full operations during November.
The third leg of China’s energy imports, coal, also fell in October from September, with 25.69 million tonnes arriving last month, down 15.2% from September’s 30.29 million.
However, October’s imports were 11.3% higher than the same month last year and the first 10 months of year has seen 276.24 million tonnes imported, up 9.6% from the same period last year.
This shows imports are already just shy of the 2018 total of 281.2 million tonnes, meaning Beijing’s informal target of limiting annual imports in 2019 to the same level as the prior year won’t be met.
There is a possibility that customs clearances will be tightened in November and December, limiting coal imports, but even if this is the case, it’s worth noting that any decline will be as a result of policy, not of any softening in demand.
In contrast to the strength of energy imports, China’s appetite for industrial metals is more restrained, but not as weak as might be suggested by slowing exports and softening economic growth amid the trade dispute with Washington.
Imports of unwrought copper fell 3.1% to 431,000 tonnes in October from September, but were up 1.9% from a year earlier.
Imports of copper ores and concentrates rose 21.1% in October to 1.91 million tonnes from September’s 1.58 million, and were also up 22% from the same month in 2018.
Overall, on an implied copper basis, ANZ Banking Group analysts said imports were 5% weaker in October from September, but up 4.4% in the first 10 months of the year.
For iron ore, imports fell 6.5% in October from September, but were up 5.1% from the same month in 2018.
At 92.86 million tonnes it would be stretch to call October’s imports of the steel-making ingredient weak, but they are nowhere near as robust as they have been in recent years.
The 1.6% decline in iron ore imports in the first 10 months of 2019 from the same period last year is a reflection of the substantial loss of supply from number two exporter Brazil in following a January dam disaster that caused mine closures, and also from top shipper Australia after a cyclone in March.
Putting the commodity import data in context shows that energy, with its large domestic demand component, is largely resilient, while industrial metals, which feed into both domestic and export industries, are somewhat softer, but nowhere near levels that could be described as weak.