Home ›› 09 Nov 2021 ›› World Biz
China’s imports of major commodities in October showed the extent of the struggles of the world’s second-biggest economy with energy shortages.
There was strength in imports of natural gas and coal, but weakness in crude oil, iron ore and copper.
In effect, the October data reflected China’s need to boost power generation fuels, and how the shortage of electricity had a negative impact on energy-intensive industries such as steel and refining copper.
Coal imports looked soft in October at first glance, given that they dropped to 26.94 million tonnes, down 18% from September’s 32.88 million, according to customs data released on Sunday.
But October’s imports were also nearly double the 13.73 million tonnes from October last year, and imports have been trending higher since June, when it became apparent that China’s domestic output was not keeping up with resurgent power demand.
It’s also worth noting that October-arriving cargoes would have been purchased as Asian seaborne prices were rising to record highs, meaning Chinese buyers were desperate enough to pay massive prices to secure shipments.
Natural gas imports, including piped and LNG, were 9.38 million tonnes in October, up 24.6% from a year earlier, and have gained 22% over the first 10 months of the year.
Like coal, spot LNG prices in Asia have soared in recent months, with the weekly assessment reaching a record high of $38.50 per million British thermal units (mmBtu) in mid-October.
While China’s imports of LNG during the month would have been a mix of long-term crude oil-linked supplies and spot cargoes, the rise in natural gas imports in October despite high prices does show determination to get through the energy crisis.
One energy commodity that was weak in October was crude oil, with imports dropping to 8.9 million barrels per day (bpd), the lowest since September 2018.
Oil imports for the first 10 months of the year were 10.21 million bpd, down 7.2% from the same period in 2020.
In some ways the weak crude imports are an imposed, rather than a market outcome, given a lack of official import quotas for independent refiners.
But refinery processing rates have also come under pressure amid the general shortage of power, with the sector encouraged to use energy sparingly while coal output is ramped up in order to ensure sufficient power for the coming northern winter.
Power constraints on the steel industry also appear to have affected iron ore imports, which dropped to 91.61 million tonnes in October, down 14.2% from the same month in 2020 and also a drop of 4.2% from September.
Year-to-date imports are down 4.2%, with much of the decline coming in recent months as the authorities in Beijing moved to ensure that steel production this year would not exceed its target of being the same or lower than 2020’s record 1.06 billion tonnes.
Imports of unwrought copper did rise for a second month in October, reaching 410,541 tonnes, up from September’s 406,016 tonnes.
However, imports were down 33.6% from October last year and the first 10 months of the year has seen a decline of 21% from the same period in 2020.
It’s worth noting that imports of copper ores and concentrates were 1.797 million tonnes in October, down from September’s 2.11 million tonnes, a reflection of lower demand from refiners amid the power supply crunch.
The soft outcomes for copper and iron ore also reflect a loss of momentum in China’s key factory sector, with the manufacturing Purchasing Managers’ Index dropping to 49.2 in October, spending a second month below the key 50 level that separates expansion from contraction.
