By Clyde Russell
LAUNCESTON, Australia- China’s imports of major commodities are often viewed through the prism of the performance of, and outlook for, the world’s second-biggest economy.
But it’s probably more important to look at price trends when assessing the world’s biggest commodity importer’s inbound shipments of crude oil, liquefied natural gas (LNG), copper, iron ore and coal.
The diverging fortunes of imports of these commodities in the first half of 2024 align more closely with price movements than it does with economic performance.
This is especially the case for iron ore, the key raw material used to make steel, and a commodity that on the surface should have struggled given China’s well-documented, ongoing struggles to boost its ailing property sector.
Instead, iron ore imports have risen a robust 6.8 percent in the first half compared to the same period in 2023, reaching 611.18 million metric tons, up 35.05 million from the first half last year.
The rise in imports hasn’t been used to make much more steel, rather it’s been used to rebuild inventories.
Data from consultancy SteelHome shows port stockpiles have risen 35.7 million tons from the end of December to the two-year high of 150.2 million in the week to July 12.
It’s no coincidence that the gain in inventories almost exactly matches the increase in imports, but the question remains as to why China’s iron ore traders and steel mills have chosen to lift stockpiles at a time of uncertainty for steel demand.
The answer lies in the price, with Singapore Exchange contracts spending the first quarter of 2024 trending weaker, before consolidating at lower levels in the second quarter.
Iron ore contracts reached $143.08 a ton on Jan. 3 – its highest level so far this year – before sliding to the low of $98.36 on April 4.
Since then, the price has moved in a relatively narrow band and ended at $107.48 a ton on Wednesday.
In contrast to iron ore, crude oil imports have been weak, defying predictions from industry groups including the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency that strong Chinese demand will lead global growth this year.
The world’s top crude importer saw arrivals of 11.05 million barrels per day (bpd) in the first half of 2024, down 2.9 percent from the 11.38 million bpd over the same period last year.
The decline in crude imports came amid a rising price trend, with global benchmark Brent futures rising from $77.05 a barrel at the end of December to a high of $92.18 on April 12, as OPEC and its allies in the OPEC+ group deepened output cuts. – Reuters
