(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia May 9 The pullback in
China's imports in April of crude oil and major bulk
commodities, except coal, is more of a reminder that strong
gains can't last forever than a warning that demand is waning in
the world's biggest importer of natural resources.
On the surface, the sharp falls in April imports of crude
oil, iron ore and copper certainly appear to be a bearish
signal, a warning that commodity-intensive sectors, such as
construction and manufacturing, may be losing some momentum.
However, there are some short-term factors that help explain
the declines, and it's far too early to call an end to the trend
of robust demand for commodities in the world's second-largest
Take crude oil first, where April imports dropped to 8.37
million barrels per day (bpd), down nearly 9 percent from a
record 9.17 million bpd in March.
But put that number into context and a different picture
In the first four months of 2017, crude oil imports are up
12.5 percent from the same period last year to around 8.46
This is also substantially higher than the 7.6 million bpd
imports averaged for 2016, showing that China's appetite for
crude has jumped substantially so far this year, notwithstanding
the pullback in April.
It's also worth noting the impact of domestic policy
considerations in China, with many of the smaller, private
refiners believed to have nearly exhausted their first-half
crude import quotas.
This will likely lead to a moderation in imports in the
second quarter before a likely recovery in the second half.
Lower quotas for exports of refined products will also
likely result in moderating crude imports, and April's numbers
show this dynamic at work.
Exports of refined fuels fell 25.1 percent in April from
March, dropping to 3.5 million tonnes, or about 930,000 bpd.
This lowered the growth rate of refined fuel exports to 15
percent in the first four months of 2017 compared to the same
period a year earlier, down from 22.6 percent in the first
Part of the recent surge in China's crude imports has been
related to the ability of both state and smaller refiners to
export more refined products, so any reduction in exports will
almost automatically result in lower oil imports.
Iron ore imports slumped 13.9 percent in April to 82.23
million tonnes, the lowest monthly total since October, again
something that sounds bearish but isn't really once viewed in
The last eight months have seen four months with imports
above 90 million tonnes, including 95.6 million in March, which
was the second-highest on record.
April's imports were most likely hit by weather-related
disruptions in the main exporting region of northwest Australia
during March, when many of the cargoes would have been loading.
Falls in iron ore prices will also serve to boost China's
imports, as higher-quality but lower-cost ore from Australia and
Brazil will displace domestic supplies.
The spot price .IO62-CNO=MB fell to $60.15 a tonne on
Monday, down 37 percent from the recent peak of $94.86 on Feb.
In theory, coal imports should have also been hit by weather
in Australia, but instead they rose by 12.2 percent from March
to 24.78 million tonnes, taking the year-to-date gain to 33.2
While a detailed breakdown of coal imports by country will
only be released toward the end of May, it's likely that China
boosted imports via rail and truck from neighbouring Mongolia.
Vessel-tracking and port data pointed to a drop of about
550,000 tonnes in imports from the seaborne market in April from
March, with volumes from Australia dropping by one-third.
Coal imports are likely to remain robust, given the current
cost advantage their enjoy over domestic supplies, which have
been somewhat constrained by Beijing's efforts to eliminate
over-capacity and inefficient mines.
If you were looking for a bearish commodity story out of
China, then copper is the answer.
Imports of unwrought copper dropped 30.2 percent to 300,000
tonnes in April from March, and 33.2 percent from the year
Up to now, it had been possible to make the argument that
China was replacing imports of refined metal with ores and
concentrates, but they too slumped in April.
Imports of ores and concentrates dropped 16.6 percent from
March to 1.36 million tonnes, suggesting a lack of appetite
among China's copper smelters for imported ore.
Whether this is a signal of a broader slowdown in China's
copper demand or whether it's merely a reflection of adequate
domestic supplies and inventories is still uncertain.
Nonetheless, copper is often viewed as the canary in the
commodity coal mine, and a sustained downturn in China's imports
would likely raise the market's level of concern.
Overall, China's April commodity imports represent a return
to what might be described as more normal levels, after several
months of outsized and unsustainable growth.
(Editing by Richard Pullin)