China’s imports of major commodities remained resilient in September and paint a different picture to the market narrative that the world’s second-largest economy is struggling for momentum.
Imports of crude oil, natural gas, coal and iron ore dropped slightly from August, but all were higher than in September last year.
The first nine months of the year are showing strong growth over the same period in 2022, with crude oil imports up by 14.6%, natural gas by 8.2%, coal by 73.1% and iron ore by 6.7%, according to customs data released on Oct. 13.
The exception among major commodities was copper, where imports of the unwrought metal were up in September from August, but down from the year earlier month.
For the first nine months of the year imports of unwrought copper are down 9.5%.
But even with copper, it’s hard to make the case that the decline is because of economic weakness as it’s more likely that strong domestic production of the industrial metal lowered demand for imported material.
Copper imports were 480,426 metric tons in September, up from August’s 473,330, but down 5.8% from 509,954 in September last year.
For the first nine months of 2023, unwrought copper imports were down 9.5% to 3.99 million metric tons.
But imports of copper ores and concentrates were up 7.8% over the same period to 20.34 million metric tons, which underscores the view that domestic production of refined metal has been increasing at the expense of imports.
Crude oil imports were 11.13 million barrels per day (bpd) in September, down from August’s 12.4 million bpd, although it’s worth noting that August was third strongest month on record.
September imports were up 14% from the same month last year, and arrivals in the first nine months were 11.34 million bpd, an increase of 14.6%.
China’s refiners have ramped up processing rates in 2023, partly to meet increased domestic demand after the country ended its strict COVID-19 lockdowns, thereby boosting pent-up travel demand.
But China has also boosted exports of refined fuels, with product shipments of 5.44 million metric tons in September, which equates to around 1.45 million bpd using the BP conversion factor of 8 barrels of refined fuels to each metric ton of crude.
While September’s exports of refined fuels were down slightly from August and the same month last year, shipments in the first nine months of the year are up 35.2% to around 1.4 million bpd.
Fuel exports are likely to remain at robust levels given the availability of quotas for refiners and strong profit margins, especially for diesel.
This may be enough to keep crude imports at strong levels, although it remains to be seen how the impact of the rally in global prices since July will impact China’s appetite, given that refiners have the ability to dip into ample stockpiles if they want to trim imports.
China is forecast to see October crude imports drop to around 10.76 million bpd, according to LSEG research, most likely on expectations of lower domestic demand after the Golden Week holidays in early October.
IRON ORE, COAL
Iron ore imports dropped to 101.18 million metric tons in October, down 4.9% from August’s 106.42 million, but it’s worth noting that August was the strongest month since October 2020.
Imports of the key steel raw material were up 1.5% from September last year and are up 6.7% in the first nine months of the year. That increase feels at odds with the problems afflicting the construction sector, which has seen sales struggle amid liquidity issues for several major developers.
Part of the resilience in iron ore imports may be because China’s steel mills, which produce about half of the global total, have been lifting exports, which gained 31.8% in the first nine months of the year to 66.82 million tons.
Low port inventories of iron ore may also be supportive of imports, with stockpiles monitored by SteelHome slipping to 105.2 million metric tons in the week to Oct. 13, the lowest in seven years and down 19.2% from the 130.2 million in the same week last year.
Coal remains a standout for its strength, with September imports of all grades coming in at 42.14 million metric tons, close to August’s record 44.3 million and up 27.5% on September last year.
Curbs to domestic output, lower hydropower generation and competitive seaborne prices compared to local grades have combined to keep coal imports at high levels.