The diverging fortunes of imports of those commodities within the first half of 2024 align extra intently with worth actions than it does with financial efficiency.
That is particularly the case for iron ore, the important thing uncooked materials used to make metal, and a commodity that on the floor ought to have struggled given China’s well-documented, ongoing struggles to spice up its ailing property sector.
As an alternative, iron ore imports have risen a strong 6.8% within the first half in comparison with the identical interval in 2023, reaching 611.18 million metric tons, up 35.05 million from the primary half final yr.
The rise in imports hasn’t been used to make far more metal, somewhat it’s been used to rebuild inventories.
Information from consultancy SteelHome reveals port stockpiles have risen 35.7 million tons from the top of December to the two-year excessive of 150.2 million within the week to July 12.
It’s no coincidence that the achieve in inventories nearly precisely matches the rise in imports, however the query stays as to why China’s iron ore merchants and metal mills have chosen to carry stockpiles at a time of uncertainty for metal demand.
The reply lies within the worth, with Singapore Alternate contracts spending the primary quarter of 2024 trending weaker, earlier than consolidating at decrease ranges within the second quarter.
Iron ore contracts reached $143.08 a ton on Jan. 3 – its highest stage to this point this yr – earlier than sliding to the low of $98.36 on April 4.
Since then, the value has moved in a comparatively slim band and ended at $107.48 a ton on Wednesday.
In distinction to iron ore, crude oil imports have been weak, defying predictions from trade teams together with the Group of the Petroleum Exporting Nations (OPEC) and the Worldwide Power Company that sturdy Chinese language demand will lead international development this yr.
The world’s high crude importer noticed arrivals of 11.05 million barrels per day (bpd) within the first half of 2024, down 2.9% from the 11.38 million bpd over the identical interval final yr.
The decline in crude imports got here amid a rising worth pattern, with international benchmark Brent futures rising from $77.05 a barrel on the finish of December to a excessive of $92.18 on April 12, as OPEC and its allies within the OPEC+ group deepened output cuts.
For the reason that April excessive, Brent trended weaker to a low of $78.09 a barrel on June 3, however has since recovered to finish at $85.08 on Wednesday.
The decline in China’s oil imports additionally stands in distinction to the rise in pure gasoline imports, each through pipeline and as LNG.
Whole pure gasoline imports jumped 14.3% to 64.65 million tons, in accordance with customs knowledge, with a lot of the rise coming from LNG, given pipeline capability constraints.
The rise in LNG imports got here because the spot worth of the gasoline for supply to north Asia fell sharply from the fourth quarter of 2023, earlier than stabilizing at decrease ranges.
The value dropped from a excessive of $17.90 per million British thermal models (mmBtu) to a low of $8.30 on March 1.
It has then staged a rally to finish at $12.10 per mmBtu within the week to July 12, nevertheless, there are already indicators that the current rise in costs is beginning to crimp demand.
Pure gasoline imports had been 10.43 million tons in June, down 7.9% from Could’s 11.33 million, in accordance with customs knowledge.
COPPER, COAL
Copper imports additionally present a relationship to cost, having elevated when costs had been modest and declined after they rose.
Imports of unwrought copper rose 6.8% within the first half of 2024 to 2.763 million tons, which appears a comparatively sturdy efficiency.
However what’s price noting is that June’s imports had been 436,000 tons, down 15.2% from Could’s 514,000 and the weakest since February.
The weak June imports got here after international benchmark London copper costs climbed to a file excessive of $11,104.50 a ton on Could 20.
The value spent the primary quarter in a comparatively slim vary anchored round $8,300 a ton earlier than surging to the Could excessive.
Given the lag between worth actions and the bodily arrival of cargoes, it seems that Chinese language copper patrons lifted imports in the course of the interval of modest costs, however have pulled again because the sturdy rally to the Could excessive.
The ultimate main commodity exhibiting a correlation to costs is coal, with China’s imports rising a powerful 12.5% within the first half to 249.57 million tons.
Whereas sturdy energy demand and struggling home output have boosted import demand, it’s price noting that seaborne thermal coal costs have been trending weaker.
Indonesian coal with an power content material of 4,200 kilocalories per kilogram , a grade in style with Chinese language utilities, ended at $52.70 a ton within the week to July 12, down 9.2% to this point this yr, in accordance with assessments by commodity worth reporting company Argus.
The general message from China’s commodity imports is that worth is probably going a very powerful driver of volumes, with financial circumstances a secondary issue.
(The opinions expressed listed here are these of the creator, Clyde Russell, a columnist for Reuters.)
(Enhancing by Miral Fahmy)