BEIJING: The pullback in China’s imports in April of crude oil and major bulk commodities, except coal, is more of a reminder that strong gains can’t last forever than a warning that demand is waning in the world’s biggest importer of natural resources. On the surface, the sharp falls in April imports of crude oil, iron ore and copper certainly appear to be a bearish signal, a warning that commodity-intensive sectors, such as construction and manufacturing, may be losing some momentum. However, there are some short-term factors that help explain the declines, and it’s far too early to call an end to the trend of robust demand for commodities in the world’s second-largest economy.
Take crude oil first, where April imports dropped to 8.37 million barrels per day (bpd), down nearly 9 percent from a record 9.17 million bpd in March. But put that number into context and a different picture emerges. In the first four months of 2017, crude oil imports are up 12.5 percent from the same period last year to around 8.46 million bpd. This is also substantially higher than the 7.6 million bpd imports averaged for 2016, showing that China’s appetite for crude has jumped substantially so far this year, notwithstanding the pullback in April. It’s also worth noting the impact of domestic policy considerations in China, with many of the smaller, private refiners believed to have nearly exhausted their first-half crude import quotas. This will likely lead to a moderation in imports in the second quarter before a likely recovery in the second half.
Lower quotas for exports of refined products will also likely result in moderating crude imports, and April’s numbers show this dynamic at work. Exports of refined fuels fell 25.1 percent in April from March, dropping to 3.5 million tonnes, or about 930,000 bpd. This lowered the growth rate of refined fuel exports to 15 percent in the first four months of 2017 compared to the same period a year earlier, down from 22.6 percent in the first quarter. Part of the recent surge in China’s crude imports has been related to the ability of both state and smaller refiners to export more refined products, so any reduction in exports will almost automatically result in lower oil imports.
