Column: Supercycle, which supercycle? Chinese imports of raw materials do not impress (Russell)

Workers drive loaders unloading imported coal at a port in Lianyungang, Jiangsu province, China, December 5, 2019. REUTERS / Stringer

The bullish glow surrounding commodities may have lost its luster, with imports in May from the main Chinese buyer looking distinctly unimpressive and far from levels associated with a new supercycle.

Imports of major commodities, crude oil, iron ore, copper and coal all fell in May from the previous month, customs data showed on Monday.

While the various commodities have been affected by different factors, including some more related to supply problems, the decline does little to support the view that the demand for natural resources is so strong that a new period of prolonged price hike began.

Crude oil imports amounted to 40.97 million tonnes, equivalent to about 9.65 million barrels per day (bpd), down from April’s 9.82 million bpd and 14.6% lower than the 11.3 million bpd of May of last year.

This was the lowest daily import count this year and around 1.2 million barrels per day of Chinese refinery capacity was offline for maintenance.

However, it’s also worth noting that shipments arriving in May would likely have been staged in February and March, at a time when crude oil prices were starting to pick up, with Brent futures going up to around $ 54 a year. barrel early February through late March at around $ 64.

As Chinese refiners sourced cheap crude from collapsing prices during last year’s coronavirus pandemic and a brief price war between major exporters from Saudi Arabia and Russia , they may feel little pressure to import more crude than just enough to cover their refinery processing plans.

China’s imports of raw copper in May fell to 445,725 tonnes from 484,890 tonnes in April, but up from 436,030 tonnes in May last year.

Copper imports may have been disrupted by a new wave of coronavirus infections in China in April, which resulted in the border closures of the world’s largest exporter of industrial metal.

But like crude oil, the price of copper soared, reaching an all-time high above $ 10,400 a tonne in early May, with prices rising sharply throughout April, when contracts for benchmark 3 months in London gained 12% over the month. .

Strong copper gains may have led some Chinese buyers to cut back on investment purchases, leading to lower import volumes in May.


May’s iron ore imports fell to 89.79 million tonnes, from 98.57 million in April, and the lowest monthly figure since 87.03 million in May 2020.

However, May’s bottom line is most likely the result of supply issues, especially from number two shipper Brazil, which is still battling the coronavirus outbreak.

Spot iron ore also hit a record high in May of $ 235.55 a tonne, according to commodity price news agency Argus, and like other commodities, it recorded strong gains in recent weeks.

But unlike crude oil and copper, where Chinese buyers may be willing to sit on the sidelines during a period of high prices, iron ore is benefiting from strong demand for steel as Beijing stimulus spending slows down. affect the economy.

Authorities in Beijing have attempted to bring down iron ore prices through a series of measures, such as increasing the cost of trading, but their success has been short-lived and likely will remain so until then. as the supply of iron ore approaches its potential. , or China is in fact trying to limit steel production, which it shows no signs of doing.

Coal imports amounted to 21.04 million tonnes in May, compared to 21.73 million in April and 22.06 million in the same month in 2020.

In the first five months of the year, coal imports amounted to 111 million tonnes, down 25.2% from the same period last year.

Part of the decline is self-inflicted, as China banned the purchase of coal from Australia and struggled to source sufficient alternative cargoes from other exporters, such as Indonesia, Russia and the United States.

This has led to unusual price disparities across various grades of coal, with Australian medium-grade thermal coal selling at a significantly lower price than higher-grade fuel, mainly purchased by Japan and South Korea, while coal Indonesian substandard has risen sharply as Chinese buyers turn to this source.

Overall, China May’s trade figures don’t scream that a commodities supercycle is underway. Instead, they tell the story of continued strong demand, but import growth is being constrained by the impact of rising prices and ongoing supply issues.

Our standards: Thomson Reuters Trust Principles.

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