China’s imports of major commodities for April show the impact of price trends, with strength where prices were trending down and weakness where prices were moving higher.

The temptation for market observers is to view China’s commodity imports through the prism of how the world’s second-biggest economy is performing, but it increasingly appears that price movements are a more determining factor, at least in the short term.

For April, there was strength in imports of iron ore, coal and natural gas, while arrivals of crude oil and copper were soft.

While there are still economic factors at play, it’s difficult to construct a narrative that explains both the robust iron ore imports and the moderate arrivals of copper, especially because China’s property sector is supposedly weak, but industrial output is gaining momentum.

It’s more useful to look at the prices that prevailed when China, the world’s biggest buyer of natural resources, arranged the cargoes that were delivered in April.

China’s iron ore imports were 101.82 million metric tons in April, up 1.1% from March and 12.6% from the same month in 2023, bringing arrivals for the first four months to 411.82 million tons, a gain of 7.2% over the corresponding period last year.

Cargoes that arrived in April would most likely have been booked during February and March, a time in which the spot price for the steel raw material was declining.

Benchmark iron ore contracts traded on the Singapore Exchange SZZFc1 dropped to a 17-month low of $98.36 on April 3, having slipped 31.5% from an 18-month high of $143.60 on Jan. 3.

The declining price led Chinese steel mills and traders to buy iron ore, lifting portside inventories from an eight-year low of 104.9 million tons in late October to a near two-year high of 144.6 million by the end of April.

SOFT COPPER

In contrast to iron ore, China’s imports of unwrought copper declined in April, dropping 7.6% from the prior month to 438,000 tons, according to official data released on May 9.

Apart from February’s soft imports, April’s arrivals of copper were the weakest in a year.

The global benchmark copper price in London CMCU3 hit the lowest so far in 2024 of $8,127 a ton on Feb. 9, and has since rallied 23.1% to end at $10,004 on May 9.

This means that China’s copper buyers were dealing with higher global prices for the industrial metal at a time when they were arranging cargoes for April delivery, likely leading them to trim purchases.

The same dynamic can be observed for China’s imports of crude oil, which dropped to 10.88 million barrels per day (bpd)in April from March’s 11.55 million bpd.

April’s arrivals were the weakest since January and imports over the first four months of the year are a mere 2.0% higher than for the same period last year.

Global benchmark Brent crude futures LCOc1 have been trending higher since hitting a six-month low of $72.29 a barrel on Dec. 12, and the rally accelerated from early February onwards after the OPEC+ group of exporters committed to maintain production cuts.

Brent’s high so far in 2024 came on April 12 when the contract reached $92.18 a barrel, and it has since moderated to end at $83.88 on May 9.

However, given the lag between when cargoes are arranged and physically delivered, which can stretch to three months, it means China’s refiners were buying April delivery crude at a time when prices were rising rapidly.

Looking at two other major commodities, coal and natural gas, also support the theme of prices driving import volumes.

Imports of all grades of coal were 45.25 million tons in April, up 9.4% from March and just short of December’s record 47.3 million.

While domestic output has struggled to rise fast enough to meet demand amid hydropower shortages, it’s also the case that the main types of coal that China imports have remained relatively low in price.

Indonesian thermal coal with an energy content of 4,200 kilocalories per kg, as assessed by commodity price reporting agency Argus, was largely flat in the first quarter of 2024, trading in a narrow range around $56 a ton, having softened from levels above $80 in the first quarter of 2023.

Spot liquefied natural gas (LNG) for delivery to North Asia LNG-AS was also weakening in the first quarter, dropping from $11.70 per million British thermal units at the end of 2023 to a low of $8.30 in the week to March 1.

China’s imports of natural gas, which includes both LNG and pipelines, rose 20.7% in the first four months of the year, with April imports of 10.3 million tons being slightly below March’s 10.76 million, but well ahead of the 8.98 million from April last year.

The overall message from China’s commodity trade numbers is that while overall economic conditions may set a longer-term trend, movements from month to month reflect shifts in price momentum.

Source: Reuters edited by Jamie Freed