China’s strong imports of key commodities question weak economic outlook: Russell

LAUNCHESTON, Australia, Oct 16 (Reuters) – China’s imports of key commodities were resilient in September, painting a different picture to the market narrative that the world’s second-largest economy is struggling for momentum.

Imports of crude oil, natural gas, coal and iron ore fell slightly from August, but all were higher than in September last year.

The first nine months of the year show strong growth, with crude oil imports up 14.6%, natural gas up 8.2%, coal up 73.1% and iron ore up 6.7% over the same period in 2022. October 13.

The exception in major commodities was copper, where imports of the unwrought metal rose in September from August, but fell from the previous month.

In the first nine months of the year, imports of uncast copper fell by 9.5%.

But even with copper, it’s hard to attribute the decline to economic weakness, as strong domestic production of the industrial metal is more likely to reduce demand for imported goods.

Copper imports in September were 480,426 metric tons, up from 473,330 in August, but down 5.8% from 509,954 in September last year.

In the first nine months of 2023, unwrought copper imports fell 9.5% to 3.99 million metric tons.

But imports of copper ores and concentrates rose 7.8% to 20.34 million metric tonnes during the same period, underscoring the view that domestic production of the refined metal is increasing at the expense of imports.

Crude oil imports were 11.13 million barrels per day (bpd) in September, down from 12.4 million bpd in August, although August was still the third strongest month.

September imports were up 14% from the same month last year, and arrivals in the first nine months were 11.34 million bpd, up 14.6%.

China’s refineries have increased processing rates in 2023 to meet increased domestic demand after the country ended its strict COVID-19 lockdowns, thereby increasing demand for travel.

But with product exports of 5.44 million metric tons in September, China also boosted exports of refined fuels, which equates to about 1.45 million bpd using a BP conversion factor of 8 barrels of refined fuel for every metric ton of crude oil.

Although September’s exports of refined fuels were down slightly from August last year and the same month, exports rose 35.2% to about 1.4 million bpd in the first nine months of the year.

Fuel exports remain at strong levels thanks to allocations to refiners and strong profit margins, especially for diesel.

That may be enough to keep crude imports at strong levels, although it remains to be seen how the impact of volatility in world prices from July will affect China’s appetite, with refiners having the ability to dip into sufficient stockpiles if they want to organize. Imports.

China forecast October crude imports to fall to around 10.76 million bpd, according to LSEG research, based on expectations that domestic demand will ease after the Golden Week holiday in early October.

Iron ore, coal

Iron ore imports fell to 101.18 million metric tons in October, down 4.9% from August’s 106.42 million, but August 2020 was the strongest month since October.

Imports of the key steel raw material rose 1.5% from September last year and rose 6.7% in the first nine months of the year. That increase feels at odds with problems plaguing the construction industry, which has seen sales struggle amid liquidity problems for many major developers.

Part of the backlash in iron ore imports comes as China’s steel mills, which produce half of the world’s total, are ramping up exports, which rose 31.8% to 66.82 million tonnes in the first nine months of the year.

Lower port inventories of iron ore could also support imports, with inventories tracked by SteelHome falling to 105.2 million metric tons in the week to Oct. 13, the lowest in seven years and down 19.2% from 130.2 million in the previous week. year.

Coal was a standout for its strength, with September imports of all grades coming in at 42.14 million metric tons, close to August’s record of 44.3 million and up 27.5% from September last year.

Constraints in domestic production, low hydropower generation and seaborne prices relative to local standards have combined to keep coal imports high.

The views expressed here are those of the author, a Reuters columnist.

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