Buffeted by a convergence of external factors, from the trade war with the US, to slowing economic growth and the outbreak of African swine fever among its hog herds, China’s exports and imports of commodities are shifting in both size and direction. Eleanor Wragg takes a look at the main winners and losers.



The Asian giant is the world’s largest consumer of primary energy, and, consequently, is its largest importer of oil and gas. With Chinese energy demand now six times as big as it was in 2000, according to Arjen van Dijkhuizen, senior economist at ING, it is not a surprise that China’s crude imports are in rude health.

In November 2019, the country imported a record-breaking 11.18 million barrels per day (bpd), up from 10.72 million bpd in October and 10.04 million in September, in order to feed the growing number of new refineries it built throughout 2019. This also came amid relatively low oil prices, which guaranteed profitability and high margins. “There were also some uncertainties about potential political issues with Iran in the Gulf of Hormuz having implications on global supply that could potentially drive prices up, so in anticipation of that, China was importing more oil to refine and increase its stockpiles of certain types of refined oil products in its economy,” says Carlos Casanova, Asia Pacific economist at Coface.

However, this growth may not be here to stay. “It’s not reasonable to assume that a slowing China can continue to account for most of the new oil demand growth as it has done in the past,” says Casanova. “There is an expectation that oil prices will no longer spike, so I would say that we will see a reversal in oil imports and it will start to slow going forwards.”

Despite China’s much-vaunted coal-to-gas switching project, part of its war against the smog which has historically enveloped its major cities, gas imports haven’t been as robust. “Gas is more expensive and China has a lot of coal, so it seems like they have potentially reshuffled that priority, and they are going to move eventually towards more natural gas for heating, but it will be more gradual than people were expecting in the first place,” says Casanova, adding: “It is also quite expensive to invest in transportation and storage infrastructure for LNG, and so, we have seen that lose a bit of steam.”

Another factor impacting flows is China’s decision to increase its tariff on US LNG from 10% to 25% in June 2019, which sent imports of the fuel plummeting in the first 10 months of 2019, down 87.2% year-on-year to 258,955 tonnes. “As a result, there is a discrepancy with higher oil imports and lower gas imports. But, going into next year, we do expect to see subdued demand for oil, and then just the continuation of what we have seen for gas, potentially it picking up slightly because of base effects,” says Casanova.

As gas demand gradually grows in the coming months and China’s Belt and Road Initiative gathers pace, onlookers expect to see a shift in its source markets for energy feed products. “The BRI in the Middle East and across Eurasia is a mechanism, not just for expanding China’s reach and influence across those regions, but also for ensuring its own energy security: one of its main import markets for LNG has been Tajikistan but it is now increasingly importing from Oman as well,” says Rebecca Harding, independent economist and CEO of Coriolis Technologies.



After climbing to a 20-month high in September to 99.36 million tonnes, China’s iron ore imports dipped in October and November, with a combination of deteriorating investor sentiment around construction developments and rising prices subduing demand. “Private investment has fallen because there are expectations that the economy will slow, and sentiment is quite negative as a result of the US-China trade war,” says Casanova. At the annual session of the National People’s Congress in March 2019, Premier Li Keqiang unveiled US$119bn of local infrastructure projects, from railway to road and waterway works. But with little other domestic infrastructure investment underway, other than these publicly-funded projects, China seems unlikely to increase its need for raw materials anytime soon.

Price is also an issue: at the beginning of 2019, an expectation that China was going to launch a massive fiscal stimulus sent iron ore prices skyrocketing, but this failed to come to pass. “Although China will announce some form of stimulus measures that will include infrastructure investments, our understanding is that they will refrain from a massive stimulus like that of 2009,” says Casanova. “Therefore, weakness in demand in volume terms is something that will continue into 2020.”

Australia, which accounts for over half of the world’s iron ore exports, seems like the obvious loser, as China buys around 80% of its exported iron ore. Although high prices for the material bolstered miners’ earnings in 2019, economists’ projections indicate that this is unlikely to continue into 2020.

Copper, on the other hand, is doing unexpectedly well. China’s imports in November of the orange metal climbed 12% from October to 483,000 tonnes, according to data from the General Administration of Customs. This figure was 6% higher than November 2018. This was driven by domestic factory activity, which unexpectedly burst back into life following months of contraction: the purchasing managers’ index for China’s manufacturing sector firmed up to 50.2 in November from 49.3 in October, taking it above the reading of 50 which indicates expansion. As a result of optimism about Chinese demand, global copper prices headed towards seven-month highs in December, with countries such as Chile, China’s main sourcing market, and the Democratic Republic of Congo, a key African copper exporter to the Asian giant, likely to benefit.

However, the extent to which Chinese industrial output growth can continue to bolster copper remains to be seen, with the International Monetary Fund (IMF) forecasting the country’s GDP growth could fall to 5.8% in 2020, down from the predicted 6.1% expansion for 2019.



China’s pork imports surged in the last quarter of 2019, after an outbreak of African swine fever decimated its home-grown herds. “China is the world’s largest pork consumer, so if they start importing massively, it has implications along the entire global supply chain, with Danish and Spanish pork exporters impacted as a result,” says Casanova. A serendipitous bit of timing around trade talks will also see US exporters, long shedding sales to cheaper competitors in South America and Europe, rake in bumper sales of the meat.

As part of a phase one deal to cancel tariffs that had been planned to take effect on December 15, China waived import tariffs for pork shipments from the US. The deal, which also includes a commitment for Beijing to increase purchases of US farm products to US$40bn over the coming two years, should push US-China agri flows higher still.

And it isn’t just global pork exporters who are doing well. The country is also substituting pork for other meat products, such as chicken, from markets including Brazil, with the Brazilian Animal Protein Association saying it sees chicken exports climbing by as much as 7% year on year as a result.

However, on the downside, animal feed exporters are struggling. “Soya is a good example, as it is used in the manufacture of pork in China. There is currently less demand for it, because nobody is expanding their hog herds at the moment. If anything, a lot of these producers are shifting to other alternatives, such as chicken. And so, it does have implications on the soybean exporters to China, who on top of everything are struggling with the politics of the US-China trade war, especially with US exports of soy being targeted by the Chinese authorities as one of the key products,” says Casanova.


Tightening belts on the road

Although China’s Belt and Road Initiative looks positive for its exports on paper – the planned and completed transport and infrastructure projects linking Asia, Africa and Europe should bring with them a boost in demand for raw materials used in construction, opening up new markets for Chinese steel flows – there remains little in the way of hard data to demonstrate any increase thus far.

“One of the conditionalities of Chinese investment is that the procurement process is also controlled by China, and Chinese materials have to be used, which gives China the ability to export its metal overcapacity,” says Casanova. However, he points to increasing political sensitivity over indebtedness to China among emerging Asian economies as a potential headwind. “The initiative has slowed down a little bit. Part of it is in response to a lot of countries becoming more cautious about what happens when you take on additional debt.”

In addition, pressure from the Trump administration on the IMF to ensure any funds provided to bail out Pakistan would not be used to pay off its enormous debt to China – which it accumulated through a flurry of infrastructure projects under the China-Pakistan Economic Corridor – have left other struggling nations wary of over-extending themselves on cheap Chinese money.

The new government of the Maldives is currently working on to a “diplomatic” solution to restructuring its Chinese debt, while since coming into power in 2018, Malaysian Prime Minister Mahathir Mohamad has repeatedly vowed to renegotiate or cancel what he refers to as “unfair” Chinese infrastructure deals.

As a result, any significant off-shoring of excess Chinese capacity has yet to materialise, and the BRI has not – at least for now – translated into large shifts in commodity trade flows.