On the surface China’s imports of major commodities appeared to continue their resilience in September, even as the country’s total exports and imports laboured under the strain of the trade dispute with the United States.
But while volumes held up in September for imports of crude oil, natural gas, iron ore, coal and copper, it’s worth sounding a note of caution given the timing of the week-long national holidays in the first week of October.
There is every chance that some of the strength in September’s commodity imports was because of a pull-forward of purchases ahead of the holiday period.
This raises the possibility of a softer October as fewer cargoes were offloaded during the holiday period and purchasers withdrew from the market during the break.
China’s crude oil imports rose to 10.04 million barrels per day (bpd) in September, up 10.8% from the same month in 2018 and also higher than August’s 9.93 million bpd.
The higher imports were likely because of expectations of increased demand during the national holidays, given this is a popular time for people to travel to visit relatives.
It’s too early to say whether October will see a pullback, and vessel-tracking and port data compiled by Refinitiv in fact suggests that the current month will remain strong for crude imports.
The data is pointing toward seaborne imports of around 9.6 million bpd in October, which would be added to pipeline imports of around 857,000 bpd, taking the total to well over 10 million bpd.
However, this figure is likely to revised toward the end of the month as it becomes clearer whether tankers currently en route to China will arrive and discharge their cargoes in time to be counted in October arrivals.
Imports of liquefied natural gas may slip in October, with the vessel-tracking data pointing to a decline from September’s 4.7 million tonnes.
One of China’s three largest receiving terminals, PetroChina’s Rudong, has been operating at reduced rates following an accident late last month, and it’s only expected to be fully repaired in November.
Imports of iron ore surged to a 20-month high in September, reaching 99.36 million tonnes, up 4.8% from August and 6.3% from the same month a year earlier.
Similar to crude, the vessel-tracking data suggests that October will continue to be robust, with seaborne arrivals of the steel-making ingredient slated to be around 96.4 million tonnes.
Again, this is subject to revision and excludes a small amount of iron ore that enters overland from Mongolia, but the Refinitiv data does suggest no signs of a pullback in steel mills’ appetite.
Imports of unwrought copper were up 10.1% to 445,000 tonnes in September from August, but were down 14.6% from the same month a year earlier.
September’s copper imports were the highest in eight months, but the increase looks more related to a favourable arbitrage with London copper prices rather than any sign of increased demand for the industrial metal.
Where weakness does look apparent is in imports of coal, which dropped 8.1% to 30.29 million tonnes in September from August’s 32.95 million, although they were up 20.5% from September 2018.
Refinitiv data estimates that seaborne coal imports in October will drop further, with 17 million tonnes expected to arrive so far.
However, this figure is likely to rise as more cargoes leave major suppliers Indonesia and Australia.
However, a drop in coal imports may not be a sign of weakening commodity demand, rather it may be a reflection of the desire by the authorities in Beijing to limit 2019 imports to the same level as those in 2018.
Given that the first nine months of the year saw imports of 250.6 million tonnes, and 2018’s total was 281.2 million, it implies a sharp slowing over the last quarter if the target is to be met.
Overall, preliminary indications are that China’s imports of major commodities will remain solid in October, apart from coal, although given the potential influence of the holidays it will probably make more sense to look at September and October imports together.
Source: Reuters