Are price movements a result of structural shifts? China's commodity imports are bifurcated: Russell
China's imports in 2024 of major commodities were a mixed bag. Iron ore, coal, and natural gas volumes reached record levels, while crude oil was weak.
Raw data from the largest buyer of natural resource in the world suggests that some parts of the economy perform well, while others are struggling or are undergoing structural changes.
The main challenge when analysing China's imports of commodities is to separate temporary factors from those that are part a longer-term trend.
Crude oil may be the best example.
Customs data published on Monday showed that imports in 2024 will be 553.42 millions metric tons. The imports for 2024 were 553.42 million metric tons, according to customs data released on Monday.
It is tempting to think that the biggest crude importer in the world has peaked by 2024 and that arrivals will be lower for 2025 and beyond.
This is mainly due to the rapid adoption of New Energy Vehicles in China, which includes both hybrids and full-electric vehicles.
The switch to NEVs in China is impressive, and is likely to continue. However, the fleet of cars with internal combustion engines is still growing, which should theoretically increase demand for gasoline.
Diesel is no different. A new alternative, LNG-powered trucks, is eroding the market share for the heavy transport fuel.
In 2024, China's natural gas imports will increase by nearly 10% to 131.69 millions tons, including both LNG and pipelines.
The price of crude oil is the main factor that has led to a decrease in crude oil imports. Brent crude oil futures have remained above $70 per barrel since 2024, except for two days in September where it briefly fell below this level.
The stability in crude prices this past year reflects the output discipline shown by the OPEC+ exporters who have reduced the potential supply of crude oil by a total of 5.5 million bpd.
It's possible that China's refiners are also of the opinion that crude oil prices are too high and have reduced their purchases as a result.
IRON ORE COAL RECORDS
It seems that, on the other side of the weak crude imports and high prices, record imports of iron ore were achieved largely due to lower costs.
Imports of iron ore rose by 4.9% to 1.236 billion tonnes in 2024, an increase of 57.5 millions tons.
Iron ore prices on the Singapore Exchange reached their peak for 2024 very early in the new year. They hit $143.60 per ton on January 3.
Then, they dropped to $91.10 per ton on Sept. 10 before recovering and ending the year at $103.61.
The 28% decline in prices over the past year is likely to have prompted Chinese steel mills to increase their purchases, particularly in the second half when the price was lower than the first.
Official data shows that the crude steel production in the first eleven months of 2024 fell 2.7% compared to the same period in 2012.
SteelHome consultants SteelHome monitor port inventories.
Imports of coal also reached a record in 2024. They reached 542.7 million tonnes, an increase of 14.4% over 2023’s 474.42 millions.
The demand for coal increased as hydropower production fell and electricity consumption rose. However, the main reason that imports were boosted was because seaborne prices are competitive with the domestic output. This encouraged utilities, particularly in the southern part of the country to look to Indonesia and Australia to supply their needs.
Argus, a commodity reporting agency, assessed Indonesian coal at $49.97 per ton during the week ending December 30, a drop of 13.5% on the year. This is the lowest price since April 2021.
STEADY COPER
Copper was the only major commodity to have a steady growth rate in 2024. Imports of unwrought, or raw, copper rose a modest 3,3%, reaching 5.68 million tonnes.
China's copper imports, which reached a record of 6.68 millions tons in 2020 have remained in a relatively narrow range between 5.87 and 5.5 million.
Copper's vital role in manufacturing and construction is the best indication of China's true economic state.
Copper imports indicate a slowdown in growth for the second largest economy of the world. This is because strong sectors like NEVs, energy transition products and solar panels can't offset weaker ones such as residential construction.
These are the views of the columnist, who is also an author. (Editing by Michael Perry).
(source: Reuters)
