This week saw oil markets join copper and other metals in starting 2023 with a bang with the China re-opening story running ahead of the reality in Friday’s December and 2022 trade data.
While China did report a massive trade surplus (the largest the world has seen at more than $US800 billion or well over $A1 trillion) that was due to the deepening weakness in the economy, not strength.
But some commodities – led by iron ore and copper – have been off and running since December but oil had lagged until last week and the boost from the lower US inflation reading which in turn sent the value of the greenback and US bond yields sharply lower.
That saw oil bounce, helped by the China re-opening story but that reading was flawed.
The rebound in oil – with Brent and US crude up more than 8%over the week, wasn’t shared by thermal coal which fell close to 10% for 6,300 kilocalorie coal traded in Newcastle, while LNG prices continued to ease in north Asia – down to around $US20 a million British thermal units, the lowest for several months.
In Europe, the price of natural gas continued to decline as well, with the Dutch TTF price fluctuating around 64 euros a megawatt hour, the lowest since well before the invasion of Ukraine 11 months ago.
In fact the closing price on Friday was the lowest since last January. The warm winter in Europe is helping offset the gas supply crisis and will probably see much if the region and the UK avoid a big price shock this year and a recession.
Conversely it is bad news for Russia and President Putin whose energy-driven export income is being crunched badly by falling prices and demand.
China is back buying more expensive coal from Australia rather than boosting imports from Russia, according to state media reports at the weekend.
Among the metals, copper passed the $US9,000 a tonne level in London on Friday while the Comex front month price ended above $US4.20 a pound and up more than 7% for the week and over 10% since the start of the year.
Comex gold rose 2.8% over the week to settle around $US1,921 an ounce on Friday and Comex silver settled up 1.72% at $US24.23 an ounce.
Gold is up more than 5% for the year, but is lagging behind copper
In Singapore than price of 62% Fe iron ore fines rose more than 6% last week to end at $US124.45 on Friday after topping $US131 a tonne earlier in the day – the highest for 17 months.
Helping drive this surge as well was a weaker US dollar and lower US Treasury bond yields, usually two of the key factors influencing short term commodity prices.
So far as Australia is concerned, the key commodity figure from Friday’s trade data release was China’s imports of iron ore for December and 2022.
The Customs Administration revealed the country’s steel industry imported 1.11 billion tonnes of ore, down 1.5% from 2021. That was a far better outcome than we saw mid-year when imports in the first 8 months of the year were off 3.1%.
Imports in December totalled 90.6 million tonnes, up from 86.07 million in December, 2021, but down 8.1% from November’s 98.85 million tonnes.
Reuters reported that there was a backup of ships waiting to unload iron ore (and some other bulk commodities) which will see larger than forecast totals for January.
China’s need for copper is another indicator tracked by analysts and while there was an obvious Covid impact in the fall in metal imports in December, other data showed a record year for shipments into the country of metal and concentrates.
Imports of unwrought copper and copper products were 514,049 tonnes in December, data from the General Administration of Customs showed on Friday.
The purchases, which included anode, refined, alloy and semi-finished copper products, were down 12.7% from 589,165 tonnes in December 2021, a 14-month high.
China’s copper concentrate imports totalled 25.27 million tonnes in 2022, an all-time high according to Reuters.
That year’s imports were up 8% from 23.40 million tonnes imported in 2021.
Oil is another key import for China and December’s crude imports rose 4.2% from a year earlier as state refiners bought Saudi crude at lower official prices and independent refiners rushed to use unfilled import quotas before year’s end.
This brought the 2022 purchases of the world’s top buyer to 508.28 million tonnes, 0.9% lower than 2021 and the second annual dip in a row, as China’s strict COVID-19 control measures hit the economy and fuel demand hard. Jet fuel and petrol demand eased while consumption and exports of diesel also fell.
Refiners imported 48.07 million tonnes of crude oil last month, equivalent to 11.3 million barrels a day according to data from the General Administration of Customs.
That was a touch lower from November and up from 10.9 million bpd in December 2021.
As reported, imports of coal fell to 293.2 million tonnes last year, down 9.2% from 2021 and well under the unofficial import quota of around 300 million tonnes a year.
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In 2022, China-Australia trade totalled $US220.91 billion, down 3.9% year-on-year, the Customs data showed.
Australian exports to China reached $US142.09 billion, a drop of 13.1% year-on-year.
State media claimed the fall was because China abandoned some Australian imports and sourced them elsewhere, but the fall can be blamed on the drop in iron ore prices in late 2022 when they fell to around $US76 a tonne, the lowest for more than two years and under the $US83 a tonne in November, 2021.
As well imports of LNG fell in the final quarter as did prices.
Important as the size of that trade is to Australia, to China it’s a blip – around 3.6% of the more than $US6.1 trillion value of the country’s foreign trade in 2022.
