China's Commodity Imports Remain Robust: Russell

Posted by Joseph Keefe
Thursday, March 8, 2018
It's safe to dismiss any impression that China's imports of major commodities such as crude oil and iron ore were weak in February, despite the numbers suggesting as much.
The timing of the Lunar New Year holiday usually affects when imports are counted as having arrived in the world's largest buyer of commodities.
This year the week-long holiday fell entirely in February, likely resulting in a pull-forward of the counting of imports into January, meaning February's arrivals appear weaker than they should.
Crude oil imports in February were 32.26 million tonnes, China customs said on Thursday, equivalent to about 8.41 million barrels per day (bpd).
That looks like a massive drop from January's 9.57 million bpd, which was the strongest month on record.
Putting the first two months of 2018 together, however, gives an import rate of about 9.02 million bpd, up a fairly strong 10.8 percent from the same period last year.
It's a similar story for iron ore, with February imports plunging 16 percent to 84.66 million tonnes from January's 100.3 million, which was the second-highest month on record.
Again, taking the first two months together gives an import total of 185 million tonnes, up 5.4 percent on the same period last year.
Vessel-tracking and port data compiled by Thomson Reuters tends to be less lumpy than the official customs data, with the numbers showing January arrivals of 89.54 million tonnes of iron ore, and February pegged at 85.09 million, giving a two-month total of 174.63 million.
The shipping data doesn't exactly align with customs data as it doesn't include any iron ore China imports that come overland, such as from neighbouring Mongolia.
STEEL EXPORTS SLIDE
Coal imports were another area of strength in the first two months of 2018, rising 14.4 percent from the same period a year ago to 48.7 million tonnes, despite on the surface looking weak after they dropped 25 percent in February from January.
Imports of unwrought copper also dropped in February, falling 20 percent from January to 352,000 tonnes.
Similar to other major commodities, though, the copper imports were quite robust on a year-to-date basis, having increased by 9.8 percent in the January-February period this year compared to the same period in 2017.
The conclusion can only be that China's appetite for imported commodities remains robust and consistent with the current narrative of an economy that is performing fairly well, notwithstanding areas of concern, such as credit quality.
A further sign of this is steel product exports, one of the few areas of genuine weakness in the Chinese commodity complex.
Steel product exports are down 27.1 percent to 9.5 million tonnes in the first two months of the year compared to the same period a year ago.
This is largely a reflection of a tighter domestic market in the wake of enforced closures of some blast furnaces over winter as part of measures to reduce air pollution.
But it also shows that domestic steel prices are high enough to keep what is being produced within the local market.
China's steel exports have been trending lower in recent months, having slumped 30.5 percent in 2017.
This fact sits somewhat uncomfortably with U.S. President Donald Trump's planned new 25 percent tariff on imports, with China's exports cited by his administration as one of the reasons behind the decision.

Trump is on somewhat safer ground with his planned 10 percent import tariff on aluminium, given China's exports of unwrought aluminium and products have surged 25.8 percent to 817,000 tonnes in the first two months of 2018 from the same period last year.  

By Clyde Russell

Categories: Contracts Finance Energy Fuels & Lubes Government Update Logistics

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