Chinese imports of key energy commodities have experienced a rollercoaster of emotions this year. Weak crude oil purchases unsettled investors and markets were concerned about China’s disappointing economic growth.
In contrast, coal imports are on an upward trend and are expected to reach a record high in 2024, whereas previous forecasts had assumed stagnant or only modest growth.
LNG purchases have also increased this year, mainly due to lower spot prices in Asia compared to last year.
As China’s electricity demand rises due to higher consumption in industry and the service sector, coal imports are expected to surpass all previous record highs. At the same time, liquefied natural gas (LNG) is increasingly being used to power trucks, which is also leading to rising imports.
So far this year, China has imported increasing amounts of most major commodities, with the exception of crude oil.
Chinese purchases of liquefied natural gas, coal, copper and iron ore jumped in the first half of the year compared with the same period last year, despite an ongoing real estate crisis and a weakening economy that disappointed market bulls with below-expected growth in the second quarter.
China’s tendency to stock up on raw materials at lower prices may explain why most raw material imports have increased despite economic growth that has fallen short of expectations.
According to China’s Coal Transportation and Distribution Association, coal imports will reach a record high in 2024. The expected increase would be about 5% above the all-time high of 2023.
Although China is a world leader in the expansion of solar and wind energy capacity, more than half of its power generation in the electricity sector still comes from coal.
Coal imports rose by 12.5% year-on-year in the first half of the year. Relatively low international prices also played a role in the higher import volumes. However, weaker domestic coal production at the beginning of the year and the need to avoid power shortages in mid-summer are likely to have contributed significantly to the higher coal imports.
While coal and LNG imports are rising, China’s crude oil purchases have stalled this year, and the world’s largest crude importer has likely been building up inventories even amid lower import volumes – a sign that immediate oil demand appears weak.
Chinese crude oil imports fell in June and July compared to the same months in 2023, and imports in July were also lower month-on-month.
China imported 9.97 million barrels per day (bpd) of crude oil in July, 12% less than in June and 3% less than in July 2023.
In the first half of 2024, crude oil arrivals also fell by 2.3% compared to the first half of the previous year, according to data from the Chinese customs administration released in early July.
Crude oil import trends through the end of 2024 will serve as a partial source of information for analysts and market participants, who will closely monitor all available oil data from China to assess whether the authorities will succeed in stimulating the economy and preparing it for a short-term recovery.
Weak Chinese oil consumption so far this year has already prompted major forecasters to revise downward their projections for global oil demand growth in 2024 and 2025.
OPEC, which had not revised down its 2024 demand growth forecast since first releasing a 2024 forecast in July 2023, cut its estimate this week, citing disappointing consumption data this year and expectations of slowing Chinese demand growth.
The International Energy Agency (IEA), which has been pointing to weaker demand from China all year, left its estimates for global demand growth unchanged from the previous month, but noted that China’s oil demand fell for the third consecutive month in June and that China had “significantly built up” its crude oil inventories.
Crude oil data from August onwards will continue to be closely watched as it shows signs of a growth trend in the Chinese economy and is the main driver of international crude oil prices.
By Tsvetana Paraskova for Oilprice.com
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