China iron ore, coal imports slump due to weak demand
Chinese imports of iron ore and coal dropped sharply in August from the month before amid slackening demand and abundant supply, with rapidly falling prices failing to stoke appetite in the world’s top buyer of those commodities.
A swift retreat in Chinese demand has already driven global iron ore prices to near five-year lows and local coal prices to their weakest in six, with analysts warning that the outlook for shipments to the country remains grim in the wake of its economic slowdown and festering oversupply.
But a steadying in copper shipments and a second monthly gain in crude oil shipments were bright points in a deluge of data issued on Monday, with a recovery in imports of the red metal suggesting that the worst of the fallout from a suspected financing scandal at Qingdao Port could be over.
“Import demand for commodities has slumped even on the back of falling prices, reflecting soft domestic demand. The outlook for the commodities sector remains weak in the face of the economic slowdown,” said Ren Zeping, an analyst at Guotai Junan Securities.
China’s economy has had a bumpy ride this year. Growth rebounded slightly in the second quarter from an 18-month low thanks to a stream of government stimulus measures, but hopes that the recovery would gain traction were dashed in July when data showed activity was stumbling again.
The nation’s appetite for commodities has also suffered on the back of tightening credit, Beijing’s war on pollution and burgeoning inventories.
The second fall in China’s August headline import growth figures, which marked their worst performance in over a year, has fuelled speculation on whether authorities will loosen policy further to revive local demand.
Coal imports by China, which accounts for about a quarter of global trade in the material, plummeted for the second month to 18.86 million tonnes in August, according to official data from the General Administration of Customs of China. That was the lowest since September 2012.
China’s coal consumption has been hit by a combination of slower economic growth, increased hydropower output and Beijing’s fight against pollution, causing local prices to slump to a six-year low.
The around 18-per cent monthly drop in August shipments was exacerbated by fears Beijing would roll out policies to restrict
The uncertainly has put a chill on trade because it is like having a sword swinging over one’s head - you’re afraid to move because you don’t know when the import curbs will come.
Shanghai-based trader
coal imports with high ash and high sulfur, as a way to aid those on a growing list of loss-making miners.
“The uncertainly has put a chill on trade because it is like having a sword swinging over one’s head - you’re afraid to move because you don’t know when the import curbs will come,” said a Shanghai-based trader. He declined to be identified as he was not authorised to speak with media. August iron ore imports declined just over 9 per cent from the previous month to hit a two-month low of 74.88 million tonnes, as weakening steel demand has clashed with a flood of supply.
Even though iron ore prices are near a five-year low after dropping nearly 38 per cent this year, its demand outlook remains murky as major Chinese steel mills have started slashing output to cope with swollen inventories and poor sales.
“Chinese steel mills, coming off the leaner construction season, tend to be slower in the seaborne market,” said Mark Pervan, head of research at ANZ Banking Group.
“This year, you’ve probably got the additional motivation of steel mills trying to continue to keep prices low, so they’re really trying to stay away from the seaborne market to keep prices from recovering.”
Meanwhile, soy imports fell nearly 20 per cent from July to hit a three-month low of 6.03 million tonnes, hurt by lukewarm demand from livestock and food processing sectors on the back of the economic slowdown.
Analysts said imports could fall below five million tonnes in September and October due to the end of the South American sales season.
China’s crude oil imports rebounded from two months of decline to mark 6.13 million barrels per day ( bpd) in August, up 9.5 per cent from a year ago.
The increase was partly driven by the return of PetroChina’s Lanzhou refinery after an overhaul, as well as robust gasoline demand during the summer holiday season, analysts said. Imports of copper steadied after three months of decline, unchanged from July at 340,000 tonnes.
Fears of a metal financing fraud at Qingdao Port had rocked the market in May, causing imports of the metal to dive to a 15-month low in July as banks either halted or reduced lending.
But analysts warned that imports would probably remain muted in the coming months on the back of nagging worries about potential losses from the financing fraud, with exposure from major banks and trading houses having already surged to US$ 1.2 billion. — Reuters