China's Nov commodity imports confirm trends; copper the outlier: Russell
LAUNCESTON (Reuters) – The sharp rebound in China’s imports of major commodities in November was more of a return to normal service than any sign of a resurgence in demand in the world’s largest buyer of natural resources.
Certainly, it’s appealing to look at the November numbers and conclude that China’s appetite for commodities is storming ahead, but that ignores the reality that the data was affected by the week-long holidays in early October.
In the past three months, China’s commodity imports were extremely strong in September, with record iron ore purchases, unbelievably weak in October and now roaring back to strength in November.
A better tactic in understanding the dynamics of China’s commodity imports is to average out the past three months and then try to discern the trends.
Iron ore imports were 94.5 million tonnes in November, up from October’s 74.5 million but below September’s all-time high of 102.8 million.
The average monthly imports for the three months are 90.6 million tonnes, which is slightly higher than the 90.1 million they have averaged so far in 2017.
In other words, iron ore demand in recent months has been more or less in line with the first eight months of the year, meaning it is showing solid growth from 2016, so is far from either collapsing, as the October number suggested, or soaring, as September and November numbers alluded to.
Crude oil imports were the equivalent of 9.01 million barrels per day (bpd) in November, up from October’s 7.3 million and level pegging with the 9.01 million bpd from September.
Averaged for the three months, imports were 8.44 million bpd, exactly the same rate as the average for the first 11 months of the year.
Again, this shows more the impact of the October holidays than any clear shift in the existing trend toward strong growth that has been in place all year.
Crude oil imports are up 12 percent in the first 11 months of 2017 compared to the same period a year earlier as China continues to fill strategic storage, as well as allowing smaller, independent refiners to import more crude and export more refined fuels.
Coal imports present a somewhat different picture to iron ore and crude oil, showing less of a decline in October, but equally less of a rebound in November.
November’s total was 22.05 million tonnes, up from October’s 21.28 million but down from September’s 27.08 million.
The average for the three months is 23.5 million tonnes, which is actually higher than the 22.6 million for the first 11 months of the year.
The last three months have been boosted by September’s outsize imports, which weren’t unwound by October and November.
However, while it’s still too early to be definitive, it appears that coal imports are slowing ever so slightly.
It’s perhaps surprising that they haven’t eased at a faster pace given China’s focus on switching to cleaner fuels, such as natural gas, in an attempt to lower air pollution over the winter months.
Natural gas, copper stand out
Certainly, natural gas imports have surged, with customs data showing pipeline and liquefied natural gas (LNG) supplies reaching 6.55 million tonnes in November, surpassing the previous record of 6.1 million from December last year.
The split between volumes from pipelines from central Asia and LNG imports will be known in about two weeks, but shipping data suggests that November LNG imports will breach 4 million tonnes for the first time.
The major commodity where it does appear that November was unambiguously strong is copper, with unwrought imports of 470,000 tonnes, the strongest since December last year, and up from both October’s 390,000 and September’s 430,000.
The three-month average is 430,000 tonnes, which is well above the 385,500 average for the first 11 months of the year.
Imports of copper ore and concentrates were also strong in November, coming in at 1.78 million tonnes, up from October’s 1.4 million and September’s 1.47 million.
The three-month average of 1.55 million tonnes is some 8.4 percent higher than the 1.43 million average for the first 11 months of 2017, indicating that China’s copper demand is accelerating.
While there is a seasonal pattern to copper demand in China, with manufacturing demand ramping up in the fourth quarter, it does appear that China is reversing the trend for most of the year toward slower copper imports.
Unwrought copper imports were 5 percent lower in the first 11 months of 2017 compared to the same period last year, a slower rate of decline than the 9.4 percent drop for the first nine months of the year.
Overall, the November commodity import numbers largely confirm the trends already in place, namely good growth in crude oil and iron ore, strong growth in LNG and perhaps a slight easing in demand for coal.
The outlier is copper, which appears to be reversing its weaker trend for the first three quarters of 2017.
(Column by Clyde Russell; Editing by Joseph Radford)