China's Import Slide


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By Derek Langston

Head of SSY Consultancy & Research

With so many fresh developments impacting this year’s dry bulk market, China has not always been the headline story.

Nonetheless, inbound volumes of three key cargo types into China in the first half of the year are in themselves remarkable. China’s customs statistics show combined imports of coal (including lignite), iron ore and soyabeans were 697 Mt in January-June, down 99 Mt on the previous six months and down 53 Mt on January-June 2021.

 

As the chart below highlights, the fall in the 1h22 of 99 Mt from the preceding half-year was exceptional in the context of recent years and, in percentage terms, represents the steepest half-year on half-year decline since 1998. At the forefront of the combined 99 Mt cargo drop into the 1h22 was coal.

 

Imports of coal (including lignite) had jumped to a record six months in the 2h21, but, with (1) hydropower generation resurgent, (2) international supply tight, (3) industrial activity slow to revive after air pollution controls and Covid lockdowns and (4) localised flooding disruption, imports in the first six months of this year retreated to a six-year low. Efforts are under way to lift domestic coal output.

At the same time falling crush margins have diminished demand for imported soyabeans, but the next-largest decline into the 1h22 was in iron ore: imports in the 1h22 slid by 28 Mt to 536 Mt, as the steel sector battled against rising input costs and sluggish downstream demand. In an apparent attempt to bolster economic activity, Chinese media sources reported a new round of infrastructure projects involving “highways, waterways and port projects” for the 2h22 following a State Council meeting on 29 June. Similarly, on 7 July it was reported that the Ministry of Finance was considering letting local government sell 1.5 trillion yuan ($220 billion) of special bonds to finance infrastructure projects, which Bloomberg described as “an unprecedented acceleration of infrastructure funding”.

 

SSY Consultancy & Research

13 July 2022

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