China’s appetite for commodities wanes after years of growth


China’s imports of key commodities are facing strong headwinds in the second half of the year, which could spell trouble for producers around the world who depend on its economic engine to fuel demand for energy, food and materials.

The rapid growth of Asia’s top economy has generally been enough to drive up imports every year, creating a reliable safety net for global consumption and even reminiscent of the last demand super cycle that peaked about a decade ago. But that growth is slowing, due to damage to the economy that is arguably self-inflicted by government policy, as well as worsening global conditions.

Energy imports in particular plunged in June, ending a weak first half that could presage a rare annual drop in purchases of many commodities. Crude oil, gas, coal, palm oil and iron ore all look vulnerable to fairly steep declines in demand. Copper shipments are one of the few areas to reverse the trend in the first six months.

Beijing is trying to organize a recovery which should help boost the consumption of raw materials. But that is unlikely to be enough to fully offset the growing threats of tough virus-related business restrictions, a deepening crisis in the real estate sector, soaring energy prices due to the war in Ukraine and the possibility that the global economy is heading into a recession.

Crude oil

China’s economy is expected to grow just 3.9% in 2022, according to the latest Bloomberg survey, below the government’s 5.5% target and last year’s 8.1% growth. It’s a grim omen for commodity demand that “could test oil’s resistance above $100 a barrel,” Bloomberg Intelligence analyst Henik Fung said in a note.

China’s crude imports are heavily dependent on travel and transportation activity, and will likely decline for the second year in a row as refiners cut back on purchases as the country continues to face virus-related shutdowns. Inventories remain high and high international prices are putting off buyers, so any form of recovery will likely have to wait until the fourth quarter. Prior to 2021, Chinese imports had not declined since at least 2005.

Gas & Coal

China is eyeing an unprecedented drop in imports of natural gas, the cleaner-burning fuel touted as replacing coal on the path to net zero emissions. BloombergNEF analyst Daniela Li expects a decline of 5.5% to 158 billion cubic meters, mainly due to a drop in demand for maritime cargoes of liquefied natural gas, which could fall by as much as at 15%.


According to a note from Wood Mackenzie Ltd, the reasons for the fall of LNG are multiple. They include a sluggish economy, rising international prices, government support for clean coal, a warmer than usual winter, and growth in the use of renewable energy. energy. Increased domestic gas production and increased pipeline supply also reduced inbound shipments.

An almost certain decline in coal purchases for the first time since 2015 is simpler. China has accelerated domestic mining to record levels and imposed price caps that make imports unprofitable, after crippling power shortages last year and the price spike caused by the invasion of China. Ukraine by Russia. Imports will drop 22% to 250 million tons this year, according to the China Coal Transportation and Distribution Association.

Palm oil

China’s palm oil purchases have already collapsed. June’s import volume of 70,000 tonnes was 81% lower than a year ago and the smallest haul in data dating back to 2004. It also capped the weakest six-month period ever for imports . Demand for the most ubiquitous edible oils has suffered as virus restrictions imposed by China chill the restaurant and foodservice industries.


The recent drop in global prices has prompted buyers to arrange more shipments for August and September, according to Huishang Futures Co. However, Beijing’s recent decision to extend the ban on hotels hosting weddings, parties and conferences, despite the low number of cases in the capital, highlights the challenges the sector will face as long as China persists with its Covid Zero policy.

Iron & Copper

Iron ore imports through June are around 4% behind last year’s pace, having fallen in 2021 after the government ordered steel mills to cut production from low levels. records in an effort to limit carbon emissions. Another cut has been mandated for 2022.

China’s vast steel industry, meanwhile, is in the doldrums, warning of crisis conditions due to weak demand and falling profits. Although Beijing likely needs more alloy as it turns to infrastructure spending to revive the economy, these projects have long lead times. Meanwhile, demand from an even more critical sector – the property market – has deteriorated, with mortgage holders withholding payments on unfinished homes.

Consider China’s policy to reduce its dependence on foreign suppliers by increasing domestic ore production, and the move to produce cleaner steel from scrap metal and iron ore imports will likely fall for a second year, according to Bloomberg Intelligence.


Copper and copper ore are bright spots among imports, and shipments of both continue to outperform last year. China’s raw copper transport in June was the highest in 2022. Given its use in construction, this is apparently at odds with weakness in iron ore, according to a note from Capital Economics, although a explanation is that traders were “taking advantage of the arbitrage opportunity between copper prices in Shanghai and London.

In any case, the onshore market remains bearish, according to recent comments from executives, with rising imports and higher domestic production likely to keep prices under pressure for the time being.

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