A liquified natural gas(LNG) storage tank and workers are
reflected in a puddle at PetroChina's receiving terminal at Rudong port in
Nantong, Jiangsu province, China September 4, 2018. REUTERS/Stringer/File Photo Purchase Licensing Rights
LAUNCESTON, Australia, Feb 6 (Reuters) - China's
imports of major commodities have made a strong start to the new year, but
caution is warranted in reading too much into the robust January figures
because of the potential influence of the upcoming Lunar New year holidays.
The week-long holidays fall entirely in February this year, from
Feb. 9 to 15, making it more likely that January's imports of crude oil,
liquefied natural gas (LNG), thermal coal and iron ore were boosted by traders
and end-users bringing forward purchases.
In contrast, the Lunar New Year fell entirely in January last year,
from Jan. 21 to 27, which in turn most likely led to imports being deferred
into February of 2023.
But even allowing for some pull forward of imports into January,
the numbers look impressive, especially in light of other economic indicators,
such as the manufacturing index, which suggest the world's second-biggest
economy is struggling to build momentum.
Imports of iron ore look particularly strong for January, with
commodity analysts Kpler estimating arrivals of 112.57 million metric tons of
the key steel raw material.
This would be close to a record high, exceeded only by the
official customs data peak of 112.64 million tons in July 2020.
LSEG estimates January iron ore imports at 105.27 million tons,
and even if the lower of the two analysts' figures is correct, it would still
be an acceleration from December's customs number of 100.86 million.
China customs usually doesn't give January commodity import
numbers, preferring to combine them with February figures and release a joint
number in early March, ostensibly to avoid distortions from the new year
China's imports of seaborne thermal coal have also started 2024
strongly, with Kpler estimating arrivals of 27.9 million tons of the fuel
predominantly used to generate electricity.
While this is lower than December's 31.7 million tons, it's
substantially higher than the 20.85 million from January 2023 and continues a
recent trend of strong arrivals of thermal coal.
Lower prices for seaborne coal grades when compared to domestic
supplies, strong power demand over the winter peak and lower than usual
hydropower generation have combined to boost China's appetite for imported coal
in recent months.
Imports of LNG have also been higher this winter, with Kpler
estimating arrivals in January of 7.77 million tons of the super-chilled fuel.
This is down from December's 8.14 million tons, but it's worth
noting that December was the fourth-strongest month in Kpler's data going back
to 2009, while January was the fifth-highest.
LNG imports in December and January were also well above the
same months a year earlier, rising 12.1% and 28% respectively.
It's likely that lower spot prices for LNG over winter led to
increased demand, although volumes may ease in coming months as China enters
the shoulder season between winter and summer peaks.
China's imports of crude oil also maintained momentum in January,
with LSEG Oil Research estimating arrivals of 11.31 million barrels per day
(bpd), down slightly from December's 11.44 million bpd.
Oil imports have been boosted by the lower crude prices that
prevailed when the cargoes were arranged in the fourth quarter of last year.
Global benchmark Brent futures hit a 5-1/2 month low of $72.29 a
barrel on Dec. 13, having been trending lower after hitting the 2023 high of
$97.69 in late September.
While this suggests strength in China's crude imports may
continue into February and March, higher Brent prices in recent weeks amid
rising geopolitical concerns in the Middle East may slow import growth from the
second quarter onwards.