Chinese commodity imports remained robust in January despite signs of a still struggling economy and cautionary reading of the data that may have been distorted by the start of the Lunar New Year later this week.
The Chinese New Year holiday, which this year falls between February 9 and 15, may have prompted buyers to purchase crude, LNG, coal, and iron ore in advance.
Nevertheless, China’s imports of these commodities were estimated at close to December levels, suggesting that other factors – including lower oil and spot LNG prices – were at play when purchases were made two to three months ago, Reuters columnist Clyde Russell notes.
Due to the Chinese New Year holiday, the preliminary data showing strong imports should be taken with a grain of salt, as some of the import volumes could have been advance purchases. But a large part of imports was due to higher demand compared to January 2023, when China was reopening from the COVID lockdowns, and because of lower commodity prices at the time the orders were placed in the fourth quarter of 2023.
Oil prices declined in the last quarter of last year after hitting a 2023-high of over $95 per barrel in September.
Considering the time lag of around two months between crude purchases and nominations and the arrival of the crude in China, it could be concluded that Chinese refiners have continued to buy more oil when prices were falling.
With the drop in prices in the fourth quarter of 2023, China resumed the higher import levels and higher inventory builds, Reuters’ Russell wrote last month.
China’s crude oil imports in December 2023 rebounded from the low levels in November and averaged 11.39 million barrels per day (bpd). That was much higher than 10.33 million bpd of crude imports in November, when Chinese crude oil intake dropped by 9.2% year-over-year, marking the first annual decline in crude arrivals since April 2023.
In January 2024, China’s crude oil imports held up at a robust rate of 11.31 million bpd, per estimates from LSEG Oil Research. Low oil prices in November and December have been driving higher Chinese crude purchases.
Last month’s imports into China were more than 1 million bpd higher than the 10.24 million bpd imports in January 2023.
Chinese LNG imports have also held strong at the end of last year and at the start of this year amid low spot prices despite peak winter season.
Ample supply is keeping spot LNG prices in Asia around the lowest level in seven months, defying seasonal patterns in which prices spike in peak winter.
Iron ore imports into China looked robust in January, too—at close to record highs, according to estimates from commodity analysts Kpler cited by Reuters’ Russell.
Analysts and markets will have to wait a few weeks for official Chinese data on commodity imports – which comes in March for January and February combined, to avoid distortions owed to the Lunar New Year – to assess whether strong estimated imports in January suggest a more stable economic recovery.
China has boosted crude purchases since October despite signs that its economy continues to struggle to rebound with weak external and domestic demand and an ongoing crisis in the property sector.
The pace of the Chinese economic recovery, on the other hand, will influence commodity prices, especially those of crude oil, iron ore, and copper.
The latest economic data for January wasn’t reassuring of a rebound at all. The value of real estate sales plummeted by 34% year-on-year, while manufacturing activity shrank for the fourth consecutive month.
“Overall, the PMI data shows that China’s economy remains relatively soft, as confidence remains weak,” Lynn Song, Chief Economist, Greater China, at ING, said last week.
“Until forward-looking indicators such as new orders return to expansion, economic momentum is likely to remain tepid.”
China’s economic growth is set to be – as it always has been – a key factor driving oil and other commodity prices up or down.
By Tsvetana Paraskova for Oilprice.com