Commodities Overview

China’s commodity imports end 2019 on a high

Commodities Update
Written by Caroline Bain

China’s commodity imports were strong in December, and in 2019 as a whole, in part because a number of one-off structural factors boosted volumes. Looking ahead, we expect growth in commodity imports to ease back this year as China’s economy slows.

  • China’s commodity imports were strong in December, and in 2019 as a whole, in part because a number of one-off structural factors boosted volumes. Looking ahead, we expect growth in commodity imports to ease back this year as China’s economy slows.
  • Growth in China’s December exports and imports at 7.6% y/y and 16.3%, respectively, in US dollar terms was strong. (See our China Data Response.) Admittedly, much of the strength can be explained by a flattering base of comparison but, in the case of commodities, import volumes were also high.
  • Although oil imports ticked down m/m (see Chart 1), they were coming from a record high in November. And they still rose by nearly 10% last year (see Chart 2), boosted by two large new refineries coming online. This created a one-off shift up in crude oil demand, which is unlikely to be repeated this year.
  • Copper ore imports also dipped last month, but they rose by 11.6% in the year as a whole. China is increasingly smelting its own copper, which is reflected in the drop in wrought copper imports (see Chart 2 again). In contrast, iron ore imports bounced back in December. However, persistent supply problems in 2019 mean that the import numbers cannot tell us much about underlying iron ore demand. That said, export volumes from Australia’s main iron ore port point to high imports in January too. (See Chart 3.)
  • Meanwhile, petroleum product exports fell back slightly in December (see Chart 4), but they remained high. Product exports rose 14% last year, compared with falls of 1% and 8% in aluminium and steel exports, respectively. Softer global economic growth and protectionism explain the weakness in metal exports.
  • To wrap up, we expect subdued domestic demand to lead to lower growth in commodity import volumes in 2020. If the US-China Phase One trade deal involves additional Chinese buying of US energy and agricultural goods, it is likely to be at the expense of imports from elsewhere.

Chart 1: China Import Volumes (% m/m)

Chart 2: China Import Volumes (2019, % y/y)

Chart 3: Port Hedland Exports & China Iron Ore Imports

Chart 4: China Exports (3m Avg., Jan. 2016 = 100)

Sources: Refinitiv, Bloomberg, Capital Economics


Caroline Bain, Chief Commodities Economist, +44 20 7808 4055, caroline.bain@capitaleconomics.com