Russell Russell: China's major imports show that price is still the main driver of prices for commodities imported from China.
China's trade in commodities in May showed that price movements are the main driver of changes in flows.
Crude oil imports have fallen to a record low of 7.79 million barrels a day (bpd) - the lowest in eight years.
The fallout from the war in Iran is blamed for the 29% drop in crude imports. Prior to the beginning of the conflict, on February 28, crude imports were at around 11 million barrels per day.
As a result of the war, the Strait of Hormuz was effectively closed. This caused Middle East crude oil to rise sharply as 10 million barrels per day of supply were lost.
Brent futures, which peaked at $126.41 per barrel after the conflict, have since moderated to $91.45 per barrel.
The price of paper crude oil was much lower than the physical cargo price at the time that China would have been buying crude for delivery in May.
Saudi Arabia, which is the largest crude oil exporter in the world, increased the premium on its main Arab Light grade for May-loading to a record of $19.50 per barrel over the regional benchmark of Oman/Dubai. This move reflected the tightness of the physical markets at the time, with the Strait of Hormuz closed.
Chinese refiners were forced to pay a substantial premium for crude oil for May deliveries.
They chose not to pay up and instead cut imports, turning to their large inventories that they had built up over the years at lower prices.
What will China's refiners now do that crude oil futures prices and premiums for physical cargoes are lower? Will they increase imports, risking a tightening of the market that could raise prices or continue to use stockpiles as they have done in the past?
METAL MOVES
Metals trade is becoming more clear, despite the uncertainty surrounding the future moves of China's refiners.
Imports of unwrought metal fell 1.3% from April to 446 000 metric tons in May, due to high copper prices. Arrivals in the first five months of this year fell 7%, to 2.01 millions tons, from the same period last year.
London copper contracts closed at $13,615 per ton on a Tuesday, a 9.6% increase so far in this year.
China's aluminum producers, in contrast to the weak demand for copper have taken advantage of the higher price sparked by Middle East supply loss due to the Iran War by increasing exports.
China exported 632,000 tonnes of aluminum in May. This is the highest in a single year, and represents a 5.7% increase from 2025. Exports in the first five months of this year increased by?10.4%, to 2,69 million tons.
London Aluminium?futures closed at $3,547.50 per ton on February 28th, up 13% from the beginning of the Iran War.
Coal is another commodity that is influenced by price. China's coal imports dropped 8% in May to 33.27 millions tons compared to the same month last year. Arrivals for the first five month of the year fell 3.2%, to 182.62 million?tons.
On Tuesday, the price of Indonesian Thermal Coal with an Energy Content of 4,200 Kilocalories Per Kg on the Singapore Exchange reached $65.13 per ton.
The price of this grade has increased by 43% in the last year. This is largely due to the Iran War, which caused prices to rise as more Asian countries switched from natural gas to coal.
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These are the views of the columnist, who is also an author. Edwina Gibbs is responsible for the editing.
(source: Reuters)
