China’s imports of major commodities may be losing some of their strong growth momentum, with gains in the first quarter of this year failing to keep pace with those from the same period in 2017.
At first glance, China’s imports of crude oil, iron ore, coal and copper looked to have bounced back in March after a poor showing in February.
However, the first two months of the year generally result in some distortions in the data, depending on the timing of the Lunar New Year. This year’s holiday fell entirely within February, resulting in weaker import numbers.
It’s always more illuminating to look at first quarter numbers when assessing China’s commodity imports, and here the story is far more mixed.
Crude oil imports rose 7 percent in the first quarter of 2018 compared to the same period a year earlier to the equivalent of about 9.1 million barrels per day (bpd).
However, the growth rate in the first quarter of 2017 was 15 percent, meaning that although China’s imports of crude oil are still increasing, they aren’t doing so at the same pace as they did in the early part of last year.
In volume terms, the gain still looks impressive, with imports in the first quarter some 600,000 bpd more than they were in the same period in 2017.
However, it’s also worth noting that exports of refined fuels were about 1.27 million bpd, which is about 210,000 bpd more than they were in the first quarter of last year.
This implies that of the additional 600,000 bpd of crude imported in the first quarter of 2018, just over a third was exported as refined products, a further factor pointing to the loss of some growth momentum in China’s crude demand.
IRON ORE LOSES SPEED
Coal imports also looked to have rebounded strongly in March, with a 27.8 percent jump over the previous month, but the gain for the first quarter as a whole was a more modest 16.6 percent.
This growth rate is still robust, but it is about half the pace of what was achieved in the first quarter of 2017.
The story is even weaker for iron ore, with first quarter imports of 270.5 million tonnes actually being 0.1 percent down from the same quarter last year.
In the January-March period last year, iron ore imports were up 12.2 percent from the same period in 2016.
It would appear that China’s vast steel sector may be taking a breather after several months of strong gains, and the build-up of iron ore inventories at ports to record levels in recent weeks probably has helped lower the appetite for imports.
However, copper is an area of strength in China’s first quarter, with imports of unwrought copper increasing 7.3 percent in the first quarter, a reversal of the decline of 20 percent experienced in the first three months of 2017.
However, it’s likely that some of this gain is due to a change in regulations, making it more difficult to import copper scrap and thereby boosting demand for the refined metal.
Overall, the picture that emerges from China’s first quarter trade data is somewhat similar to an Australian government public information campaign on terrorism, which urged citizens to “be alert, not alarmed”.
There is little to suggest that China’s economy is slowing faster than expected, and the data show that commodity imports are still relatively robust, even if the pace of growth is slowing.
It’s likely that a healthy moderation is the best outcome for China, just so long as it doesn’t turn into something more pronounced in the current quarter.