(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, April 13 It's probably
best to look at China's extremely strong commodity imports in
March as a history lesson, rather than a pointer to future
Record high imports of crude oil, the second-most for iron
ore and a 34 percent surge in the first quarter for coal from
the same period in 2016 all speak of robust demand in the
world's importer of commodities.
However, the chances are that this is as good as it gets, at
least for a while.
This isn't to suggest that commodity imports are due for a
sharp pullback in coming months, rather the likelihood is that
they will moderate back toward more sustainable growth rates.
Crude oil imports surged 22.6 percent from February to 38.95
million tonnes, equivalent to about 9.17 million barrels per day
(bpd). This was well above the previous record of 8.57 million
bpd, which was posted only a few months back in December.
It appears that much of the surge in March oil imports was
down to buying from independent refiners keen to use
newly-acquired quotas for overseas purchases.
But it's also likely that part of the March surge was due to
the arrival of cargoes from more distant origins than the main
suppliers in the Middle East, such as Europe's North Sea and the
This reflects another impact from the agreement by OPEC and
other producers such as Russia to cut their output by a combined
1.8 million bpd for the first six months of 2017.
These cuts encouraged Chinese refiners to look to
non-traditional suppliers for crude, but cargoes purchased in
January would only have arrived last month, given the longer sea
It's also worth noting that China's exports of oil products
also jumped in the first quarter of 2017, rising 22.6 percent to
11.96 million tonnes, which is about 1.06 million bpd.
This means some of the strength in crude imports is simply a
reflection of higher exports of refined fuels, but this growth
trend may moderate in coming months as the Chinese authorities
have lowered export quotas.
With refiners also heading into their maintenance season, it
also possible that crude imports will moderate in coming months.
DOMESTIC FACTORS INFLUENCE IRON ORE, COAL
Turning to iron ore, and again the strength in March, and
indeed the first quarter, seems largely due to a growth trend
that may be easing, rather than accelerating.
China imported 95.56 million tonnes of the steel-making
ingredient in March, up 14.5 percent from the prior month and
12.2 percent from the same month in 2016, and just below the
record 96.27 million from December 2015.
This took first-quarter imports to 270.88 million tonnes, a
12.2 percent gain on the same period last year.
Imports have been rising on optimism surrounding demand for
steel as Chinese manufacturing shows signs of improvement.
But it's also the case that inventories at Chinese ports
SH-TOT-IRONINV have reached record levels, peaking at 132.45
million tonnes in the week to March 24, and falling only
slightly since than to 131.4 million for the week to April 10.
Steel output gained 5.8 percent in the first two months of
the year from the same period in 2016, providing some
justification for the strong iron ore imports.
But with steel production expected to moderate in coming
months amid ongoing cuts to capacity and efforts to control
pollution, it's likely that iron ore imports will moderate as
However, much will depend on how domestic iron ore mines
respond to the recent sharp fall in prices, and if they shut
some production, it may allow imports to continue to grow.
Spot iron ore prices .IO62-CNO=MB have declined from a
peak this year of $94.85 a tonne on Feb. 21 to $68.04 on
Thursday, with that 28.3 percent drop certain to hit domestic
miners harder than the low-cost exporters in Australia and
Coal continued its surprisingly strong run, with imports of
22.09 million tonnes in March, up 24.9 percent from February and
12.2 percent from a year earlier. For the first quarter, imports
are 33.8 percent higher at 64.71 million tonnes.
Strong domestic coal prices are likely behind the appetite
for imports, and the outlook for imports will depend on whether
the authorities are successful in getting coal miners and power
utilities to agree to longer-term supply contracts at lower
Lower exports from Australia in the wake of Cyclone Debbie,
which shut down much of the coal rail infrastructure in
Queensland state, may also cause a downward blip in imports in
April and May.
(Editing by Christian Schmollinger)