Chi­nese im­ports not fazed by US

• Year ends with a bang, with nat­u­ral gas and crude oil still in high de­mand, which may signal Bei­jing is ad­just­ing to the tar­iff dis­pute

Business Day - - FRONT PAGE - Clyde Rus­sell Launce­s­ton

China’s im­ports of ma­jor com­modi­ties ended 2019 with a bang, with strong gains show­ing that the ap­petite of the world’s largest im­porter of nat­u­ral re­sources re­mains ro­bust de­spite the trade dis­pute with the US.

China’s im­ports of ma­jor com­modi­ties ended in 2019 with a bang, with strong gains show­ing the ap­petite of the world’s largest im­porter of nat­u­ral re­sources re­mains ro­bust de­spite the trade dis­pute with the US.

The ex­cep­tion was coal, but De­cem­ber’s pal­try im­ports of the pol­lut­ing fuel were the re­sult of car­goes not be­ing cleared by cus­toms in re­sponse to Bei­jing’s wishes to put a cap on pur­chases from over­seas.

Once again, the stand­out was crude oil, with De­cem­ber im­ports com­ing in at 10.78-mil­lion bar­rels per day (bpd), down slightly from Novem­ber’s record 11.13-mil­lion bpd.

The to­tal for the year was up 9.5% from 2018 and it was the 17th straight year that an­nual im­ports have set a record high.

NEW RE­FINER­IES

The in­crease in crude im­ports has been largely driven by the start-up of two huge new re­finer­ies, with a com­bined ca­pac­ity of 800,000 bpd, mean­ing that much of the in­crease last year was struc­tural in na­ture.

How­ever, it is also worth not­ing that stor­age flows into com­mer­cial and strate­gic stock­piles were prob­a­bly about 900,000 bpd, a strong fig­ure that may not be re­peated in 2020, es­pe­cially if the strate­gic in­ven­to­ries are close to full.

A fur­ther fac­tor was the in­crease in ex­ports of re­fined prod­ucts, which gained 14% to 66.85-mil­lion tons in 2019 from 2018, ac­cord­ing to cus­toms data. Us­ing the BP con­ver­sion fac­tor of eight bar­rels of prod­uct per tonne, Chi­nese refiners ex­ported about 1.46-mil­lion bpd of fu­els such as petrol, diesel and jet paraf­fin in 2019.

Hot on the heels of crude as a top im­port per­former came nat­u­ral gas, with both pipe­line and liq­ue­fied nat­u­ral gas (LNG) ar­rivals to­talling 9.45-mil­lion tons in De­cem­ber, the third­high­est on record.

For 2019, nat­u­ral gas im­ports rose 6.9% to 95.56-mil­lion tons, down from the 31.9% growth rate recorded in 2018. The marked slow­ing in nat­u­ral gas im­ports growth is de­ceiv­ing as it was im­prob­a­ble that China could con­tinue to in­crease its im­ports at the break­neck pace of re­cent years.

It is pos­si­ble that 2019 be­comes the new nor­mal for China’s nat­u­ral gas im­ports, with 2020 likely to show rea­son­able growth, boosted largely by the ramp-up of sup­plies from a new pipe­line from Rus­sia, as well as in­creased LNG re­gasi­fi­ca­tion ca­pac­ity.

Round­ing off the en­ergy com­plex is coal, and the very weak 2.77-mil­lion tonnes of im­ports in De­cem­ber can safely be ig­nored.

The low fig­ure, about a 10th of the usual monthly to­tal, is the re­sult of car­goes not be­ing cleared by cus­toms in De­cem­ber in a bid to hold down 2019 im­ports to lev­els around the same as those in 2018.

COP­PER AND IRON

De­spite the ef­fort, to­tal im­ports for 2019 were 299.67-mil­lion tons, a smidgen be­low 300mil­lion tons and 6.6% higher than the 281.23-mil­lion tonnes in 2018.

It is likely that coal im­ports will start 2020 strongly, as the De­cem­ber-ar­riv­ing car­goes are cleared, and also as util­i­ties and traders boost im­ports af­ter win­ter weather dis­rupted the trans­port of do­mes­tic coal.

Turn­ing to met­als, im­ports of cop­per ended 2019 on a high, with 527,000 tons of un­wrought cop­per ar­riv­ing in De­cem­ber, the high­est monthly to­tal since March 2016 and up 9.1% from Novem­ber.

Over­all, im­ports of un­wrought cop­per for 2019 were 4.98-mil­lion tons in 2019, down 6% from 2018’s record 5.3-mil­lion tons.

But it is worth not­ing that im­ports were stronger in the sec­ond half than the first, sug­gest­ing the Chi­nese econ­omy was ad­just­ing to the blow from US trade tar­iffs and that the gov­ern­ment’s stim­u­lus mea­sures were start­ing to bear fruit.

An­other fac­tor is the chang­ing na­ture of China’s cop­per im­ports, with ores and con­cen­trates play­ing a more vi­tal role as do­mes­tic smelt­ing ca­pac­ity increases.

Im­ports of cop­per ores and con­cen­trates rose 11.6% to 21.99mil­lion tonnes in 2019 from 2018, the cus­toms data showed.

Iron ore also had a strong con­clu­sion to 2019, with De­cem­ber im­ports at 101.3mil­lion tons, the high­est in 27 months and up 11.7% from Novem­ber. For the year as a whole, iron ore im­ports were 1.069-bil­lion tons, up 0.5% from 2018 and not far off the record 1.075-bil­lion tons in 2017.

That an­nual growth rate may look mod­est, but it is worth not­ing that im­ports in the first half were con­strained by the loss of vol­umes from top ex­porters Aus­tralia and Brazil, af­ter weather dis­rup­tions in Aus­tralia and a dam col­lapse in Brazil.

Putting to­gether China’s im­ports of ma­jor com­modi­ties shows that while 2019 as a whole was strong, the sec­ond half was bet­ter than the first.

This is per­haps an in­di­ca­tion that the im­pact of the tar­iff dis­pute with the US is fad­ing amid eco­nomic ad­just­ments and of­fi­cial stim­u­lus ef­forts.

STR/AFP

Even keel: A cargo ship at a port in Qing­dao in China’s east­ern Shan­dong prov­ince on Jan­uary 14 2020. Com­mod­ity im­ports were stronger in the sec­ond half of 2019 than the first, sug­gest­ing the Chi­nese econ­omy is ad­just­ing to US tar­iffs and the gov­ern­ment’s stim­u­lus mea­sures are start­ing to take ef­fect. /

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