(The opinions expressed here are those of the author, a columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, May 7 (Reuters) - If 2020 was a normal year then China’s imports of major commodities would look sort of ho-hum, but given the devastating impact of the coronavirus pandemic, the performance looks remarkable.
Imports of crude oil, coal, iron ore and copper in April all rose from the March levels, and all four were stronger in the first four months of the year than in the same period in 2019.
The only blemish, if you could go as far as to call it that, was that imports of crude oil in April 2019 were slightly higher than those for this year.
While the percentage increases aren’t massive, it’s impressive that China - whose economy was shut down for much of the first quarter to help contain the new coronavirus - is showing any growth at all in commodity demand.
Crude oil imports were the equivalent of 10.42 million barrels per day (bpd) in April, according to Reuters calculations based on customs data released on Thursday.
This was higher than March’s 9.68 million bpd, but slightly below 10.64 million bpd in April last year.
For the first four months of 2020, China’s crude imports were 10.26 million bpd, 1.7% higher than for the same period last year.
This performance should be viewed in the light of the massive hit to consumption of fuel products in February and March during the coronavirus lockdowns, with some estimates as high as a loss of 4 million bpd, or roughly one-third of total demand.
What is apparent is that China’s refiners and government have been taking advantage of the plunge in crude prices to build commercial and strategic stockpiles.
While inventory builds are likely to continue in coming months, the key for the demand outlook is whether China can continue to restart its economy through the current targeted stimulus measures.
Iron ore imports were strong in April, rising 13% from March to reach 97.27 million tonnes, taking the year-to-date gain to 5.8%.
It’s worth noting that imports over the first four months in 2019 were crimped by a cyclone that struck top exporter Australia’s main mining region, and by a dam burst that led to safety closures in number two shipper Brazil.
But even so, iron ore is a standout commodity and the resilience in imports is most likely a sign that steel mills are increasing production post-lockdown and that they have confidence demand will be there from increased construction and infrastructure spending.
If iron ore was a good performer, then coal was even more impressive, with April imports of 34.22 million tonnes being 23% up from March’s 27.83 million, and 35% above the 25.3 million tonnes from the same month in 2019.
The surge in April imports came as prices in the seaborne market dropped and power demand recovered as the economy restarted.
However, there are some signs that coal imports may moderate in coming months, as domestic prices are weaker and at levels that in the past have prompted official arm-twisting and restrictions on imports.
While not quite in the league of coal and iron ore, China’s imports of unwrought copper rose to 460,952 tonnes in April, a gain of 4.3% on March and up 13.8% from April last year.
Rising copper imports could be viewed as a sign of recovery in manufacturing, as well as in construction, the two main uses for the industrial metal.
Building up depleted stockpiles and concern over supply curtailments as the coronavirus hits mines from Africa to South America may also have encouraged copper imports.
Overall, if imports of major commodities were the main indicator of the health of China’s economy after the lockdowns, then the prognosis is one of reasonable optimism.
However, it’s also worth noting that China is unlikely to be the template for the rest of the world once other countries try to restart their economies.
China has the ability to stockpile vast quantities of commodities, while taking advantage of cheap prices, with most other countries lacking both the financial wherewithal and the actual physical space to do the same. (Editing by Richard Pullin)