So far this year, China has seen imports of most major commodities increase, except for crude oil.
China’s purchases of LNG, coal, copper and iron ore surged year-on-year in the first half of the year despite a continuing property crisis and a sluggish economy, even as second-quarter growth fell short of expectations, disappointing market bulls.
If the Chinese economy is weaker than expected, why is it importing more goods that are generally seen as an indicator of economic health?
The answer may be that Chinese people tend to stock up on goods at low prices, says Reuters columnist Clyde Russell.
In the first half of 2024, China’s imports of crude oil, natural gas including LNG, coal, iron ore and copper appear to be inversely correlated with the price trends of these commodities in the international market.
China’s crude oil imports fell 2.9% in the first half of this year to about 11.05 million barrels per day.
Oil prices rose from January through early April, then fell in May and early June before recovering from June lows of below $80 a barrel to around $85 this week.
Related: OPEC+ panel not expected to propose changes to oil production policy
Indeed, crude demand appears unstable in China due to sluggish fuel consumption and refining margins, leading many independent Chinese refiners to drastically cut their crude processing rates.
But the decline in import rates so far this year could also be due to the stabilization and gradual rise in oil prices. It’s no secret that China likes to buy its own oil as cheaply as possible, which is one of the reasons it has become a major customer for Russian oil, which is under embargo in the West.
In contrast to crude oil, China’s imports of LNG, coal, copper and iron ore all increased in the first half of this year, with month-on-month trends inversely correlated with prices.
China’s natural gas imports, including via pipelines and LNG cargoes, grew 14.3% year-on-year in the first half of 2024. Despite the increased import volumes, China’s imports fell 0.8% to $31.7 billion in the first half as LNG prices fell year-on-year earlier this year, according to official Chinese data.
China increased its natural gas imports between January and April as it seeks to stockpile fuel for power plants ahead of the summer, with international prices in the first four months of 2024 at half last year’s levels. China’s natural gas imports are estimated to have increased 21% year-on-year in the first four months of 2024.
Coal imports also increased 12.5% in the first half of the year compared to the same period in 2018. Although relatively low international prices also contributed to the increase in imports, the main factors behind the increase were sluggish domestic coal production earlier this year and the need to avoid power shortages during the peak summer months.
Reuters’ Russell said iron ore imports in the first half of the year were the clearest sign yet that China is taking advantage of low prices to build inventories amid weak near-term demand.
China’s imports of iron ore, a raw material used in steel, rose 6.8% year-on-year in the first six months of the year.
But the real estate crisis caused new home prices in China to fall at the fastest pace since 2015 in June, widening the decline from May, while steel demand for the first half of 2024 weakened.
China has taken advantage of falling iron-ore prices this year to build up inventories, with prices falling from a peak of $143 a ton in January to below $100 in April before stabilizing at $105-110 a ton since.
At the same time, China’s exports of copper, diesel and alumina surged in June compared with the same month in 2023, with copper exports surging to a record high as weak domestic demand weighed on Chinese consumption of goods.
By Tsvetana Paraskova, Oilprice.com
Other popular articles from Oilprice.com:
