Covid-19? What Covid-19? China's commodity imports remain robust

Launceston, Australia

COVID-19 caused barely a blip in China's imports of major commodities, but this likely underscores the ways China differs from the rest of the world, rather than providing a template for the globe's recovery from the pandemic. China's crude oil imports in March, the month when much of the world's second-largest economy was in lockdown, were equivalent to 9.68 million barrels per day (bpd), according to official customs data released on Tuesday. That's 4.5 per cent higher than March last year and modestly down from the 10.47 million bpd average for the first two months of 2020.

What makes March's figure even more impressive is that it came against a backdrop of reports that China's crude oil demand was down by about 4 million bpd, or roughly a third, during the months because of the novel coronavirus outbreak.

Crude oil demand in March is made up of both consumption and inventory builds. While consumption was severely affected by the lockdown, China merely diverted the crude into both strategic and commercial storage, taking advantage of the slide in prices that was underway at the time.

Overall, China's first quarter crude oil imports were about 10.2 million bpd, up 5 per cent from the same period a year earlier.

This performance shouldn't be interpreted as meaning Covid-19 had effectively no impact on China's crude demand, rather it should be viewed as proof that the world's largest crude importer still has the appetite and ability to stockpile. This is unlikely to be the case for much of the rest of the world, which is about one month to six weeks behind China when it comes to the timeline of the Covid-19 pandemic.

While the US and other Western countries can add to their strategic and commercial stockpiles, they won't be able to do it to the same extent that China did in March.

The hit to oil consumption across much of the world from Covid-19 is estimated to be as large as 30 million bpd, or about 30 per cent of the global total, meaning that even additional storage purchases will be manifestly inadequate at soaking up all the available crude.

It wasn't just crude oil imports that stayed resilient through the worst of China's Covid-19 experience, with iron ore, coal and copper also holding up. Overall, what the commodity imports show is that China is unlike the rest of the world, insofar as its vast manufacturing, construction, industrial and oil refining sectors can withstand a month or two of virtual shutdown. REUTERS