By Clyde Russell
LAUNCESTON, Australia- China’s imports of major commodities in November appeared unambiguously strong, but delving into the details shows a more nuanced picture amid ongoing uncertainty.
Imports of energy commodities crude oil, natural gas, coal all showed strong gains from the prior month, as did metals such as copper and iron ore, according to official data released on Wednesday.
There is a case that some of the strength in commodity imports is because of optimism that China’s economy will soon start to feel the benefits of Beijing’s stimulus efforts, as well as moves to relax the strict COVID-19 measures that have acted as an anchor on growth so far this year.
But equally there are seasonal and other factors at work that provide a temporary boost to imports, and the outlook for coming months is clouded by a slowing global economy crimping exports and a fear that COVID-19 cases will increase at a pace too fast to allow the ongoing easing of restrictions.
Crude oil is a good example of this dynamic, with November imports hitting a 10-month high of 11.37 million barrels per day (bpd), up 12 percent from both October and November last year.
That would appear to be a strong outcome, but once again the devil is in the detail.
Part of the jump in crude oil imports can be explained by a surge in exports of refined fuels.
Shipments of products rose to 6.14 million tons in November, the highest since April last year and a jump of 37.7 percent from October and 46.4 percent from November 2021.
Using the BP conversion standard of 8 barrels of product to one ton of crude gives approximate refined fuel exports of 1.64 million bpd in November.
This is some 490,000 bpd higher than the 1.15 million bpd of refined fuels exports in October.
While there is a lag between imports of crude and exports of products to account for refinery processing and transportation, it’s likely that a good chunk of the additional crude imported in November over October was re-exported as refined products.
In addition to higher fuel exports, two new refining units with a combined capacity of 720,000 bpd have started in China in recent weeks.
These units will have needed to build up operational inventories prior to starting, and given that refineries may have up to three weeks of crude as a working stockpile it suggests that as much as 15 million barrels of additional crude has been imported in recent months.
It’s possible that crude imports will remain relatively robust in coming months, especially if refiners continue to export fuels to take advantage of strong regional profit margins, especially for diesel. – Reuters
