LAUNCESTON, Australia (Reuters) – The latest Chinese data on key imports contains both a history lesson and a warning.
Part of history is that China bought the highest numbers of crude oil, copper, iron ore and coal in 2020, demonstrating the critical importance of the world’s largest buyer of resources. natural in keeping the commodity market alive in a year when the global coronavirus pandemic threatened to crush demand.
The warning part is that the trading data for the month of December, released on Thursday, shows that the big buying spree in China seems to be coming to an end, and possibly import demand is returning to more “normal” levels.
The risk for commodity markets is that China’s 2020 imports will be as predicted for 2021, thus creating a bullish outlook when added to the consensus that distribution of coronavirus vaccines puts an end to the pandemic and leads to an increase in regenerative products.
China’s crude oil imports rose 7.3% in 2020 from the previous year to the equivalent of 10.85 million barrels per day (bpd), about 12% of global daily demand.
However, crude imports in December were just 9.06 million bpd, down 17.9% from November and 15% from the same month in 2019.
Of course, one month of relatively weak imports does not signal the start of a new trend, but it may be a cause for concern for crude oil bulls that much of the strength in Chinese imports last year was due to buy so much oil for storage when prices fell when the pandemic spread.
There is a real question mark over whether Chinese refineries, or the strategic petroleum reserve, will continue to buy in 2021 at the same pace as last year.
While Chinese refiners are likely to import more raw this year for processing, rather than storage, it is worth noting that some of this will just be imported. produced as a reformed fuel, which may simply eliminate crude demand elsewhere in Asia.
Another Chinese-backed market last year was almost copper, with imports of unwritten copper rising 34.2% to 6.68 million tonnes from 2019’s 4.98 million.
However, copper imports in December were 512,332 tonnes, down 8.7% from November. It was the third consecutive monthly decline and the lowest monthly output since May.
While London’s copper trade futures have pulled back from an eight-year high of $ 8,238 per tonne on January 8, at around $ 8,009 in Asian trade on Thursday they are still about 83% above the 2020 low.
If China, which accounts for about half of global copper demand, continues to see moderate imports, will the expected recovery in the rest of the world be sufficient to offset any decline? to balance China’s growth.
IRON ORE, COAL
Iron ore is another key commodity controlled by China, accounting for more than two-thirds of the maritime market, and is also another major commodity where imports saw higher in 2020.
Imports rose 9.5% in 2020 from the previous year to 1.17 billion tonnes amid strong steel demand as Beijing prioritized the economy with infrastructure and construction projects to drive renewed growth after the outbreak -discharged.
But like crude oil and copper, December was not just a strong month for iron ore, with imports at 96.75 million tonnes, down 1.4% from November and 4.5% lower than a year ago.
While the market outlook remains optimistic for steel demand in China, Beijing is likely to bounce back on stimulus in 2021, making it harder to see iron ore imports enjoying another year of strong gains . A year of sustainability might be a good result.
Coal was slightly more advanced among China’s major imports of goods in December, jumping 235% to 39.08 million tonnes from 11.67 million in November.
This brought the annual volume to 303.99 million tonnes, up 1.5% on 2019, and the highest ever.
However, the rise in December was more about Beijing ‘s coal policy, and reversed several months of weak results as authorities moved from discouraging coal imports to greener loads. to address fuel shortages in the colder than usual winter.
China’s coal imports are likely to remain hostile to policymakers in 2021, making it virtually impossible to make any forecasts, but to be aware that it is the absolute official choice for imports. weakening over time.
Overall, it is clear that China largely saved commodity market volumes in 2020 by encouraging imports, but this level of demand is uncertain in 2021, especially in crude oil and copper. where much of last year’s increase in purchases appears to have been directed into investments.
Edited by Richard Pullin