Doubts about China’s bulk imports

Earlier this year, confidence about predicting a continuing upwards trend in China’s dry bulk commodity imports during 2012 and further ahead was solid. Signs of strength remained clearly visible in the first half but, over the past couple of months, more questions have been raised about the outlook. Chinese imports now comprise almost one-third of global seaborne dry bulk trade, and consequently their progress is a crucial influence.
IRON ORE UNCERTAINTIES
The largest import trade into China, iron ore, comprising over half of the dry bulk commodities total, performed strongly in this year’s first six months. Iron ore imported in that period totalled 367mt (million tonnes), a 10% increase above the first half of last year. However, after reaching over 187mt in the first quarter, average volumes in subsequent months have been lower.
Steel industry output grew at a much less rapid pace. Crude steel output is provisionally estimated to have risen by 2% in the January–June 2012 period, to 357.2mt, while pig iron production at blast furnace mills was 4% higher at 335mt, according to World Steel Association statistics. These figures are likely to be revised, probably greatly, when more complete information is available.
Predictions of further growth in China’s 2012 annual iron ore imports total continued to be published recently. But the probability of a very large rise seems to be receding, amid expectations of weakening steel demand from construction and manufacturing activities, with unfavourable effects on steel production. Other factors also will affect the outcome, including ore volumes produced by domestic mines and iron ore stocks extended to include lower-grade lignite, a large category, and all types of coal products, reaching 140mt, a remarkable 66% rise from the same period a year ago.
Among the grades which China imported during the first six months of 2012, varying growth highlights differing circumstances in consuming industries. Supplies of domestically mined coal of different types also varied, while there were changes in usage of alternative fuel sources, affecting foreign purchases. Coking coal received apparently was 44% higher at 27.6mt, contrasting with steam coal imports (including anthracite) expanding by 91%, to 62.6mt.
GRAIN AND SOYA SCEPTICISM
Imports of both grain (wheat plus corn and other coarse grains) and soya into China have risen strongly in the current marketing year ending September 2012. An estimated 20% increase could raise the total to 67.8mt, based on US Dept of Agriculture calculations. But the outlook has deteriorated recently, possibly resulting in a 3% reduction during the 2012/13 year.
Despite good Chinese domestic grain output last summer, strong consumption growth was reflected in market tightness and additional imports of wheat and corn. A lower domestic soyabeans crop and rapidly rising meal and oil usage boosted the
upwards soyabeans import trend. Estimates for the summer 2012 wheat and coarse grains
PUZZLING PROSPECTS
Among other dry bulk commodity imports, many have performed strongly. Large elements include bauxite/alumina, nickel and manganese ores, steel products and woodpulp. China’s foreign purchases in the period ahead will be greatly affected by how the overall economy evolves, as well as reflecting more specific factors in individual importing industries using these raw materials or semi-finished products.
Some indicators emerging suggest that the economic growth outlook is becoming much less promising. Over the past couple of months the Chinese government has introduced measures to stimulate momentum, amid cooling activity. Many forecasters still assume that a ‘hard landing’ can be avoided, and that a manageable slowdown begins to reverse fairly soon, followed by an improving trend, but doubts remain.