China’s imports of dry bulk commodities increased at an
astonishing rate over the past 12 months. Impressive further
growth in iron ore imports was seen, and this was accompanied by
a remarkable upsurge in coal imports. Purchases of other
commodities were higher as well, causing dry bulk volumes arriving
at Chinese ports during 2009 to rise by 250mt (million tonnes).
Optimists are looking for signs of continued expansion.
After a slow start to last year amid the very severe global
recession, China’s economy regained momentum. The
government’s huge stimulus programme, announced in the previous
autumn, soon began to provide additional support for construction
and manufacturing activity. Coupled with massive growth in bank
lending, a robust revival gathered pace and was sustained through
the second half of 2009. Dry bulk commodity imports benefited
greatly, and there were other favourable factors.
COAL IMPORTS UPSURGE
One of the biggest surprises for global dry bulk trade last year was
the very strong upturn in China’s coal imports. Figures for the
2009 first 11 months point to an annual total exceeding 120mt,
triple the previous year’s volume. There were no early indications
suggesting a surge of this magnitude, following a downturn to
40.8mt in 2008.
Increased coking coal purchases were a feature. Imports of
these grades, for steel industry use, may have totalled about 35mt
last year, compared with 6–7mt annually in the two preceding
years when China was almost self-sufficient. Shortages of
domestic coking coal and attractive international prices caused
Chinese steelmakers to turn towards foreign suppliers.
Steam coal grades, for use in power stations and some other
industries, are the largest component of China’s coal import
demand. Purchases in this category from foreign sources during
2009 may have reached about 85mt, more than double the
previous year’s 34mt. Although domestic Chinese steam coal
output has been growing, consumption growth appears to have
been stronger. Also, delivered prices for international supplies,
especially in the southern coastal provinces, evidently were below
IRON ORE IMPORTS ACCELERATE
At the beginning of last year, growth prospects for China’s iron ore
imports in the 12 months ahead appeared rather subdued. Some
forecasters expected a modest increase, while others thought a
small decrease was probable. After enormous expansion over the
previous six years, a period of consolidation seemed likely.
Initial evidence confirmed this view, but it was soon overtaken
by events. Iron ore imports in January 2009 totalled 32.7mt, in line
with preceding months, but this volume proved to be the low
point. In February a rise to 46.7mt was seen, and the average over
the next six months was 54.3mt. A peak 64.6mt was then reached
in September, after which monthly volumes were sharply down.
The first 11 months’ total points to an annual 2009 volume of over
600mt, more than one-third above the previous year’s 443.7mt.
What explains this unpredicted outcome? China’s domestic
steel demand growth was much stronger than expected, amid a
rapidly reviving economy. Steel production consequently rose, and
pig iron output at blast furnace mills apparently grew by about
15%. Chinese domestic iron ore mines, which are a key supplier
to the industry, apparently increased their output at a slower rate
of around 5%, widening the market for imports.
HIGHER SOYABEAN SPURCHASES
Expectations for soyabeans imports into China during 2009 were
also cautious at the beginning of last year. An improved domestic
soyabeans crop had been harvested a few months earlier, and
consumption growth was not expected to be sufficient to absorb
this extra supply and raise foreign purchases as well.
But estimates now suggest that 2009 imports were 12% higher
than the previous year’s 37.4mt total, at about 42mt. Rising
demand for soyameal from livestock feed manufacturers has
underpinned consumption while, later last year, it became clear
that the autumn domestic soyabeans harvest was lower. A bigger
influence, however, was the Chinese government’s new policy of
building up strategic stocks of soyabeans.
FURTHER GROWTH AHEAD?
Currently, it seems unlikely that in 2010 there will be an expansion
of China’s dry bulk commodity imports similar to the past year’s
remarkably vigorous performance. Various estimates suggest that,
at best, much less rapid growth is foreseeable, and downturns in
some trades are possible. Coal imports are particularly hard to
predict. Large changes in foreign coal purchases, upwards or
downwards, can reflect small differences between percentage
changes in the vast quantities of coal produced and consumed
The extent of positive surprises in recent years, however, and
the especially notable dry bulk imports acceleration last year —
against a background of extremely difficult domestic and
international circumstances — suggest that cautious forecasts may
be proved wrong, again. Predictions for economic growth in China
over the 12 months ahead have been steadily raised, implying
strong support for many industries importing dry bulks.
Calculations for China’s GDP growth in 2010, published by the
OECD at the end of November, showed a robust improvement to
10.2%, following an estimated 8.3% increase in 2009. Benefits from
the very large monetary and fiscal stimulus introduced last year
are expected to continue through the next 12 months.
Nevertheless, this generally advantageous trend is unlikely to
benefit commodity-importing industries uniformly. Steel
production growth, in particular, may moderate.