Commodity imports mixed with weak crude, improving metals

BEIJING: China’s imports of major commodities presented a mixed picture in July, with crude oil undeniably weak, but some signs of life in industrial metals such as copper and iron ore.

The standout performer was coal, with arrivals jumping some 23.9% from the prior month, but this was likely driven by shortterm factors and doesn’t alter the overall picture of a weaker trend in commodity imports so far this year.

China, the world’s biggest crude buyer, imported 8.79 million barrels per day (bpd) in July, fractionally above June’s 8.72 million bpd, according to official data released on Sunday.

While a small increase from the prior month may not look too bad, it’s worth noting that June and July were the weakest months for imports in four years, and July’s total was down 9.5% from the same month last year.

For the first seven months of the year crude imports were 9.98 million bpd, down 4% from the same period in 2021, as fuel demand was hit by a series of lockdowns aimed at preventing the spread of Covid-19.

While these lockdowns are largely over, at least for now, the prospects of sharply higher fuel demand and therefore crude imports is still being limited by weak refinery margins and a lack of quotas to export refined products.

Crude demand among smaller, independent refiners has been rising, mainly because they have been able to access steeply discounted Russian oil.

But the larger state-controlled refiners are struggling for profits as they have to take more expensive crude from Middle East suppliers under long-term contracts, and are also constrained by regulated prices in the domestic market.

China’s imports of natural gas, both via pipeline and as liquefied natural gas (LNG), were also soft in July, coming in at 8.70 million tonnes, down from 8.72 million in June and some 6.9% below last July’s 9.34 million.

For the January to July period, natural gas imports were down 9.6% to 62.21 million tonnes, largely as a result of utilities taking less from the spot LNG market amid high prices in the wake of Russia’s invasion of Ukraine, which has led European buyers to ramp up LNG purchases amid lower pipeline supplies from Russia.

The only energy commodity with as positive story in July was coal, with imports rising to 23.52 million tonnes in July, up 23.9% from June as utilities bought to ensure sufficient supplies for the summer peak demand period.

However, coal imports were still down 22.1% from last July, and for the first seven months of the year they were down 18% from the same period last year, reflecting both stronger domestic output and higher seaborne prices, another fallout from Russia’s attack on Ukraine.

Industrial commodities presented a somewhat stronger picture, with unwrought copper imports coming in at 463,694 tonnes in July, down from 537,698 in June, but up 9.3% from last July’s 424,280.

For the first seven months of the year, imports of unwrought copper were 3.41 million tonnes, a rise of 5.8% from the same period in 2021, indicating some recovery in demand for the metal used extensively in construction and manufacturing.