Still, it’s worth looking at what happened last year. There were differences in China’s 2022 commodity imports, and established trends may persist for some time to come.
Among major commodities, the obvious weak spots were imports of crude oil and natural gas, which fell by 0.9% and 9.9% respectively in 2022 compared to the previous year.
Crude oil imports fell for the second straight year to 10.17 million barrels per day (bpd), according to official data released on January 13.
Blame is relatively easy to apportion. COVID-19 lockdowns are dampening domestic demand, while a decline in refined fuel exports in the first nine months meant these shipments fell 11% for the full year.
However, the trend of crude oil imports and product exports reversed in the last quarter of 2022. Both strengthened as the economy began to reopen, and Beijing issued higher fuel export quotas to stimulate the economy and allow refiners to capture some size. strong regional margins for products, especially diesel.
Crude oil imports in December increased by 4% compared to the same month last year, reaching 11.3 million barrels per day. Fuel exports of 7.7 million tonnes were the highest monthly figure since April and were up 25% from November’s 6.14 million tonnes.
Imports of natural gas, both pipeline and liquefied natural gas (LNG), were still weak in December at 10.28 million tonnes, down 11.8 percent from the same month in 2021 and down 0.39 percent from November :
Imports of natural gas are also recovering as China’s economy accelerates.
But there is a note of caution that also applies to crude oil. Whether Chinese utilities will return to importing the volumes of LNG that made the country the world’s top buyer in 2021 before losing the crown to Japan last year depends largely on it. spot price trajectory.
Spot price key
China will continue to import LNG under long-term, oil-linked contracts, but matching previous years’ high volumes depends on utilities judging spot prices to be low enough to make the supercooled fuel economically viable in China’s domestic market.
What level of comfort is in place for the price is debatable. It is likely to be well below the current shipping price to northern Asia of $23 per million British thermal units (mmBtu).
While the current price has been steadily declining since hitting a record high of $70.50 per mmBtu in late August, it remains high by historical standards, having traded above $20 only once before early 2021.
Chinese refiners have also been reluctant to buy crude in the past when they find prices are too high or have risen too much, too quickly.
They are likely to want to increase purchases in 2023 to meet rising domestic demand from a reopening economy and continued fuel export quotas. But they may be wary if prices start to rise significantly from the $85.28 Brent crude futures ended at on Jan. 13.
It’s also worth noting that during the first 11 months of 2022, China imported about 700,000 barrels per day more than it processed at its refineries.
Furthermore, the physical crude market works differently to paper futures such as Brent, as China’s imports for the next few months are likely already heavily committed.
This means that if processors plan to boost imports, it will take several months for this to become evident in customs data.
Iron ore, coal
Where a faster response to China’s reopening is possible is in commodities that can be more easily and quickly secured, such as iron ore.
Imports of steel raw materials decreased by 1.5% in 2022 compared to 2021. But if China’s steel mills ramp up production as the economy reopens, iron ore imports could rise rapidly in the coming months.
Read more: Iron ore’s steep profits attract Beijing’s attention as traders are invited
Coal imports could also be higher, especially as Chinese buyers take advantage of Beijing’s decision to end its informal ban on imports from Australia, previously the number two supplier.
While China may not import large quantities of Australian thermal coal, there is an opportunity to resume shipments of coking coal, which is used to make steel.
Another commodity that could potentially match high Chinese demand is copper, but this is where the biggest chance for disappointment may lie.
China’s copper imports were actually one of the few strong points in 2022, with crude copper arrivals up 6.2 percent and ores and concentrates up 8 percent.
With the global economy expected to struggle for growth in 2023, there may be a question mark over how much more copper China’s export-focused manufacturing sector will need.
If manufacturing demand is soft, the growth story for copper is based on other uses of the industrial metal, mainly construction, and whether that will be enough to see strong growth in Chinese imports in 2023.
Overall, China’s reopening is positive for its commodity demand, but the reality is unlikely to be as linear and as certain as the market seems to expect.
(The opinions expressed here are those of the author, Reuters columnist Clyde Russell.)