LAUNCESTON, Australia- China has switched from driving global demand for major commodities to being a drag on growth, with July’s customs data confirming the weakening trend for imports of crude oil, iron ore and copper.
The exception to the trend was coal, but the sharp gain in July’s imports of the polluting fuel are more a result of China having to go the seaborne market because of domestic policies that curbed local output.
China, the world’s biggest importer of crude oil, brought in 41.24 million tons in July, equivalent to 9.71 million barrels per day (bpd), according to official customs data released on Aug. 7.
This was down from June’s 9.76 million bpd, slightly above May’s 9.65 million bpd, and below April’s 9.82 million bpd.
July was the fourth consecutive month that crude oil imports were below 10 million bpd, a far cry from most of 2020, when imports surged from May to November as refiners stocked up on crude bought cheaply at the height of the crash caused by the coronavirus pandemic and a brief price war between top exporters Saudi Arabia and Russia.
At that time imports rose as high as a record 12.94 million bpd in June last year, but apart from a brief spike higher in March this year, 2021 has been a story of declining crude purchases by China.
Crude imports for the first seven months of this year are 5.6 percent below that for the same period in 2020.
That percentage decline may accelerate in coming months given the strong imports in the second half of 2020 will give a higher base for comparison.
Imports of natural gas, both from pipelines and as liquefied natural gas (LNG), also declined in July to 9.34 million tons from June’s 10.21 million tons.
However, this is more likely related to a scarcity of available cargoes of spot LNG as demand for the super-chilled fuel soars across Asia to meet rising electricity consumption during the summer air-conditioning peak.
Among metals, iron ore imports fell for a fourth consecutive month, with 88.51 million tons of the steel raw material arriving in July, down from 89.42 million in June and some 21 percent below the record of 122.65 million from July last year.
Imports for the first seven months of the year are now 1.5 percent below the same period last year.
It could be argued that weather-related supply issues in top exporter Australia and coronavirus-related production impacts in number two exporter Brazil were behind some of the weakness in iron ore imports, but this was largely a first quarter story.
Rather it appears that official curbs on steel output are finally filtering through to demand for iron ore.
Given that China buys about 70 percent of global seaborne volumes, it’s little surprise that the iron ore price has retreated sharply in recent weeks, shedding about 27 percent since a record high in May to end at $171.30 a ton, according to assessments by commodity price reporting agency Argus.
