Russell: China's crude oil imports in November recover and other commodities remain strong

The Chinese economy is having a great week, as the outlook has improved amid new stimulus measures. Commodity imports have also performed well in November.

The CSI300 index, which is the benchmark, rose 3.2% on the opening day, while government bonds rallied. The announcement of additional monetary stimulus in the official media boosted sentiment. However, the high imports of commodities in November also helped.

Natural resources are an important indicator of China's health, as it is the largest buyer in the world. This is due to its role in converting commodities into manufactured products for export or domestic consumption, in sectors like construction. China's crude oil imports rose to 11,81 million barrels a day (bpd), up 14.3% compared to the same month of 2023, and the highest month since August 2017.

This was the first time in seven months that crude imports were higher than the same month of 2023. The strength in November, however, was not enough to erase earlier weakness. Imports were down 2.1% for the first eleven months on a per barrel basis.

It is therefore likely that crude oil arrivals will decline in 2024.

Oil markets are wondering if the increase in imports of oil during November is a sign of a larger trend or if it is primarily due to a combination lower oil prices and refiners using their import quotas by the end of the calendar year.

Brent futures fell to $69.19 per barrel on September 10.

Brent traded at $71.78 on Tuesday in Asia.

Price Support Iron ore imports in November were down slightly to 101.86 millions metric tons from the October figure of 103.84 and below November 2023's 102.74.

Imports of steel, the main raw material for the industry, have been above 100 million tonnes every month since the beginning of July. They are also higher by 4.3% compared to 2023's first 11 months.

Iron ore prices at the Singapore Exchange dropped sharply between a peak of $143.60 per ton in January 2024 and a low price of $91.10 per ton in September 10. Since then, they have recovered and ended at $105.69 per ton on Sunday. However, these prices are likely to be viewed as reasonable levels by Chinese steel mills. This helps support imports.

China's unwrought copper imports were also very strong in November. They reached a record high of 528,000 tonnes, an increase of 4.3% over October.

Copper prices, like crude oil and iron ore were low during the time when November cargoes should have been ordered. Benchmark contracts in London dropped from a peak of $11,104.50 per ton of 2024 on May 20, to a minimum of $8,716 by August 8.

Since then, copper has been moving in a relatively narrow range. It was $9,205 per ton on Tuesday in Asian trade.

The imports of coal in November were 54.98 millions tons, 26% more than the same month last, and up from 46.25 millions tons in October.

China's coal imports have risen 14.8% in the first 11 month of the year to 490.03 millions tons. This is a record-high, as it already surpasses the previous high of 474.42million tons set in 2023.

China's desire to import coal is due to the demand for coal-fired electricity, as well as strong electricity production and declining hydropower output.

The trend in seaborne coal prices has also been downwards, due to the soft demand in Asia and China's need to compete against lower domestic prices.

Crude oil is the only commodity that has shown signs of improvement in November, but it still represents a weak spot.

It's important to note that lower prices are no doubt contributing to the strong demand in China for commodities. If prices rise as the Chinese economy and the global outlook improve, this may limit future volume gains.

These are the views of a columnist, who is also an author.

(source: Reuters)