Another vigorous expansion in China’s dry bulk imports last year assisted the wider revival of global seaborne trade in these commodities. Growth of volumes into China during 2017 matched the previous year’s 7% increase. Additional iron ore, coal, soyabeans and bauxite purchases were especially notable.
Global trade is greatly affected when there are large changes in China’s import volumes, which comprise about one-third of all world seaborne dry bulk commodity movements. The proportion is higher for some individual commodities. In the iron ore segment, Chinese imports of well over one billion tonnes annually are by far the biggest component, comprising over 70% of the world total.
A question naturally arising is: how will this pattern evolve over the year ahead? Some further growth in 2018 is a realistic possibility. But it seems unlikely that the upward trend will continue quite as strongly as seen in the past twelve months. Slackening, albeit moderately, of economic activity generally in China could act as a restraint, while various government policy measures related to environmental pres- sures also may have a restraining impact.
The brisk economic performance last year exceeded most expectations and solidly underpinned commodity consump- tion. Gross Domestic Product, representing goods and services output, grew by 6.8% in China last year, marginally faster than the previous year’s rise. The latest (mid- January) International Monetary Fund report suggests that a slowing trend is likely to resume in 2018, when 6.6% is estimated.
Slowing economic activity is a clear intention of the Chinese government. Rebalancing the economy away from manufacturing towards services is a long- term aim. But improving the environment is a more urgent necessity, and has been reflected in policy changes, particularly those designed to improve air quality. These influences are having effects, mainly negative, on commodity consumption and imports.
BUOYANT IRON ORE IMPORTS
Doubts about whether China’s iron ore imports growth in the past twelve months could maintain the previous year’s 7% rate of expansion proved justifiable. The upwards trend slowed, but this trade is so enormous that even a slower enlargement still adds a huge volume of cargo movements.
During 2017 the total expanded by 5%, representing an additional 51mt (million tonnes), raising the annual volume to 1075mt, most of which is seaborne. One support was the 2% rise in pig iron production at blast furnace mills, amid a strong steel consumption trend. Iron ore stocks at ports also increased, and there was continued replacement of lower-grade domestic ore output with higher-quality foreign supplies.
Forecasts point to potential for China to import a higher iron ore volume this year. Further switching towards the international market, where the superior grade material is less polluting than domestic ore, is seen as a positive aspect. However, steel production could level off or decrease if domestic demand slackens, while the port stockpiles may be reduced, implying possible negative influences as well.
STRENGTHENING COAL IMPORTS
Given the extent of uncertainties surrounding China’s coal market, it was remarkable that the imports trend in the past twelve months remained positive. After rebounding very strongly in the preceding year, there was a more measured increase.
When low-quality lignite is included, the 2017 coal imports total was 15mt or 6% higher, at 271mt. But this volume includes shipments carried overland from Mongolia, which reportedly rose by more than a quarter, and therefore the growth rate for seaborne movements was below the headline overall rise.
Despite shifts in China’s energy market towards cleaner fuels and renewable energy, coal is likely to remain the dominant
energy source for many years. In the immediate future, during 2018, several aspects are difficult to predict because government policy changes are influential. Closure of smaller, less efficient domestic mines and safety inspections have limited output, a plus for import demand. Conversely, boosting gas usage, and additional hydro-power and wind generation, is a minus factor.
HIGHER GRAIN AND SOYA PURCHASES
Supportive influences resulted in higher imports of both grain and soya into China last year. The volume of wheat, corn, barley, sorghum and other coarse grains received increased by 3mt (16%) to reach over 21mt. Soyabeans (meal imports are minimal) received rose by 12mt to 96mt.
Although domestic soyabeans output has been rising, it supplies a limited part of the market, which is still enlarging. Meal and oil consumption in livestock feed and food manufacturing continues to expand. Consequently, imports in 2018 may rise again.
Prospects for China’s wheat and coarse grains imports are more complex. Possible changes in domestic production and stocks are likely to have a big impact. Excessive corn stocks have accumulated in recent years, and the government’s policy aims to reduce these, implying adverse effects on feedgrain imports.
POSITIVE CHANGES IN OTHER COMMODITIES
Among other dry bulk commodity imports into China are forest products, steel products, fertilizers, various ores and minerals and some agricultural bulks such as sugar. This broad category apparently totalled over 290mt last year, a huge volume.
Changes in such a varied category are often mixed in magnitude and direction. Two of the largest elements are shown in the table. Bauxite/alumina imports totalled 72mt in 2017, a 30% rise. Nickel ore volumes were up by 10%, at 35mt.