Chinese imports of key energy commodities have been a mixed bag of ups and downs this year, with weakness in crude oil purchases spooking investors and markets concerned about China’s underwhelming economic growth.
In contrast, coal imports have trended higher and are now expected to reach a record high in 2024 compared to earlier forecasts of flat or minuscule growth.
LNG purchases have also increased this year, mostly due to the lower spot prices in Asia compared to year-ago levels.
As Chinese power demand rises amid higher consumption in both industry and the services sector, coal imports are expected to top previous record-highs, while LNG is increasingly used for powering trucks, also leading to growing imports.
So far this year, China has imported growing volumes of most of the key commodities, with the notable exception of crude oil.
Chinese purchases of LNG, coal, copper, and iron ore jumped in the first half of the year compared to year-ago levels, despite a continued property crisis and a faltering economy, which disappointed market bulls with growth coming in below expectations in the second quarter.
China’s propensity to stock up on commodities at lower prices could explain why most commodity imports have seen higher imports despite the economic growth faltering below expectations.
Coal imports are set for a record-high in 2024, according to China’s Coal Transportation and Distribution Association. The expected increase would be about 5% over the 2023 all-time high.
Even as China is leading the world in solar and wind capacity additions, its power sector still relies on coal for more than half of its generation.
Coal imports rose by 12.5% in the first half compared to a year earlier. Relatively low international prices also played a role in the higher import volumes. However, weaker domestic coal output earlier this year and the need to avoid power shortages in peak summer likely contributed a lot to the higher coal import levels.
While coal and LNG imports are rising, crude oil purchases in China have faltered this year, and the world’s top crude importer has likely boosted stockpiles even amid lower import volumes—a sign that apparent immediate oil demand is weak.
Chinese crude oil imports slipped in June and July compared to the same months in 2023, while July imports were also lower month-on-month.
China imported 9.97 million barrels per day (bpd) of crude in July, down by 12% from June and down by 3% compared to July 2023.
In the first half of 2024, crude arrivals also dropped, by 2.3% compared to the first half of last year, according to data from China’s General Administration of Customs released in early July.
The crude import trends until the end of 2024 will partly inform analysts and market participants, who will closely watch all available oil data from China to gauge if the authorities will manage to stimulate the economy and set it up for a rebound in the near term.
Weak Chinese oil consumption so far this year has already prompted major forecasters to revise down their projections of global oil demand growth in 2024 and 2025.
OPEC, which hadn’t made any downward changes to its 2024 demand growth view since it first published a 2024 forecast in July 2023, cut its estimate this week, citing underwhelming consumption data this year and expectations of softening Chinese demand growth.
The International Energy Agency (IEA), which has been flagging weaker Chinese demand all year, left its global demand growth estimates unchanged from last month but noted that China’s oil demand contracted for a third consecutive month in June, and China has “built substantially” crude oil stocks.
Crude oil data from August onwards will continue to be closely monitored for signs of China’s economic growth trend and as the key driver of international crude oil prices.
By Tsvetana Paraskova for Oilprice.com
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