Signs of weakness in China’s dry bulk commodity imports are very
prominent this year. Growth abruptly slackened last year to 2%,
compared with the preceding twelve months, following much
higher expansion rates previously. It now seems possible that the
2015 total will show an actual reduction, unless there is a solid
pick-up over the remaining months.
The changing pattern is having a profound effect on global
seaborne dry bulk trade. Some spectacular rises in imports into
China over the past decade have boosted the annual total from
about one-eighth of world volume, to over one-third.
Consequently the present slackening, when coupled with limited
growth in import volumes elsewhere, is being closely watched.
Part of the explanation is slowing growth in economic activity.
Although much more specific factors affect individual commodities,
a decelerating Chinese economy is having a broadly negative
impact. Slacker demand for the products of industries which rely
heavily on imported supplies of raw materials and fuels is apparent.
A revised assessment published recently (mid-August) by the
IMF suggested that GDP growth in 2015 could slow to 6.8%, from
7.4% last year, followed by a further slowdown to 6.3% next year.
The transition to a ‘new normal’ and sustainable pace in China is
set to continue, as intended by the government. One desired
outcome is to rebalance the economy, reducing over-dependence
on capital investment and exports, and increasing the emphasis on
IRON ORE IMPORTS FALTERING
After the strong rise in 2014, another large increase in iron ore
imports into China this year seemed likely, but confidence in that
outcome has faded. These ore volumes comprise about two-fifths
of the country’s entire dry bulk imports, and also comprise over
two-thirds of global iron ore trade, so their significance is
During the first seven months of 2015, China’s iron ore imports
totalled 539mt (million tonnes), a minimal reduction of under 1%
compared with last year’s same period. The slight weakening
occurred amid lower steel production, which was down by 2% to
476mt, although the steel estimate may be revised upwards when
more complete information becomes available.
Little or no potential for steel output to rise this year has been
visible for some time, given the clear signs of weakness in
consuming industries, especially construction activity. However,
despite the resulting constraints on iron ore consumption, analysts
expected imports to grow further, perhaps quite rapidly. Much
lower prices for foreign ore supplies, caused by greatly enlarged
availability, were expected to continue displacing higher priced
Chinese domestic supplies.
COAL IMPORTS DECLINING
Imports of coal into China remained on a downwards trend during
recent months. In the January–July 2015 period total imports, including low-grade lignite, reportedly declined by a massive 62mt
or 34%. From 183mt in the same period last year, the volume was
down to 121mt.
Reduced steel production is one influence, refected in lower
coking coal demand. But a much bigger factor is the remarkable
changes taking place in the power generation sector, especially
affecting coal-fired electricity production. Accompanying a
slowdown in overall energy usage and power demand, caused by
the economy’s deceleration, a fundamental shift towards cleaner
energy sources is occurring.
China’s steam coal consumption and imports have been
weakened by rising hydro-electricity generation capacity and
output, aided by abundant rainfall. Increased emphasis on gas,
nuclear power and renewable energy sources has been noticeable
as well, amid the government’s efforts to reduce both air pollution
in cities and other environmental damage associated with coal
burning. Moreover, tougher controls on the usage and importing
of low-quality coal grades have been introduced.
GRAIN AND SOYA IMPORTS BUOYANT
Contrasting with foreign purchases of dry bulk minerals, China’s
import demand for agricultural commodities remains well
supported, with clear potential for further growth. Cereals and
oilseed imports strengthened again last year and seem likely to
maintain an upwards trend in 2015.
Imports of soyabeans by Chinese buyers, the largest part of this
sector, are forecast by the US Dept of Agriculture to increase
strongly by 9% in the 2014/15 trade year ending this month,
reaching 77mt. A smaller 3% rise is tentatively predicted for the
following 2015/16 year. Imports of wheat and coarse grains in the
period now ending are estimated at over 23mt, a 20% increase,
and these are expected to stay at around that volume in the next
Expanding soya products (meal and oil) consumption is the
main influence driving soyabeans imports higher. Domestic
production of soyabeans in China has not risen in recent years.
While grain harvests have increased, consumption growth patterns
were sufficient to underpin larger foreign purchases. Currently, a
key features is much larger sorghum purchases for livestock feed.
MINOR BULK PATTERNS VARY
Numerous other cargoes form part of China’s dry bulk
commodity imports and, as a group, the overall volumes are
substantial. Two of the largest components are nickel ore, used in
stainless steel production, and bauxite together with the processed
form alumina, used in aluminium production.
Following last year’s sharp falls in both nickel ore and
bauxite/alumina imports, partial revivals during 2015 may be seen.
The outlook for a range of commodities including other ‘minor’
ores and minerals, steel products, forest products, scrap iron,
petcoke and fertilizers is mixed. Richard Scott