What China’s goods imports say about its economy

China’s imports of key energy commodities have been a mixed bag of ups and downs this year, with weakness in crude purchases spooking investors and markets worried about China’s disappointing economic growth.

In contrast, coal imports have trended higher and are now expected to reach a record high in 2024, compared to previous forecasts of flat or tiny growth.

LNG purchases have also increased this year, mainly due to lower spot prices in Asia compared to year-ago levels.

As Chinese energy demand rises amid higher consumption in both industry and the service sector, coal imports are expected to surpass previous records, while LNG is increasingly being used to fuel trucks, which also leads to increased imports.

So far this year, China has imported increasing volumes of most key commodities, with the notable exception of crude oil.

Chinese purchases of LNG, coal, copper and iron ore rose in the first half of the year compared with year-ago levels, despite an ongoing housing crisis and a faltering economy that disappointed market bulls with a below-expected growth in the second. quarter.

China’s tendency to stock up on goods at lower prices could explain why most commodity imports saw higher imports despite economic growth below expectations.

Coal imports are set for a record high in 2024, according to the China Coal Transportation and Distribution Association. Expected growth would be about 5% from the all-time high in 2023.

Even though China is the world leader in increasing solar and wind capacity, its power sector still relies on coal for more than half of its generation.

Coal imports rose 12.5% ​​in the first half of the year compared to a year earlier. Relatively low international prices also played a role in higher import volumes. However, weaker domestic coal production earlier this year and the need to avoid power shortages during the peak summer likely contributed heavily to the higher levels of coal imports.

While coal and LNG imports are rising, China’s crude purchases have fallen this year, and the world’s biggest crude importer is likely to have boosted stockpiles even amid lower import volumes – a sign that apparent immediate demand for oil is weak.

China’s crude oil imports fell 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 oil in July, down 12 percent from June and down 3 percent from July 2023.

In the first half of 2024, crude oil arrivals also fell by 2.3 percent from the first half of last year, according to data from China’s General Administration of Customs released in early July.

Crude import trends through the end of 2024 will partly inform analysts and market participants, who will be closely watching all available oil data from China to assess whether the authorities will be able to stimulate the economy and prepare it for a near-term recovery.

China’s weak oil consumption so far this year has already prompted major forecasters to revise their forecasts for global oil demand growth in 2024 and 2025.

OPEC, which has not made any downward revisions to its outlook for demand growth in 2024 since it first published a forecast for 2024 in July 2023, cut its estimate this week, citing poor consumption data this year and expectations of slowing Chinese demand growth.

The International Energy Agency (IEA), which has flagged weaker Chinese demand throughout the year, left its global demand growth estimates unchanged from last month but noted that China’s oil demand contracted to for the third month in a row in June, and China “substantially increased” crude oil inventories.

Crude oil data from August will continue to be closely monitored for signs of China’s economic growth trend and as a key driver of international crude prices.

By Tsvetana Paraskova for Oilprice.com

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