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China’s Oil And Commodity Imports See Robust Growth

  • Goldman Sachs: China’s demand for many major commodities has actually been growing at “a robust clip.
  • China’s imports of energy commodities fell slightly in September compared to the previous month; however, they grew considerably compared to a year.
  • The one exception among major commodities was copper, where imports of the unwrought metal were down 9.5% for the first nine months of the current year.
Yuan

Concerns about the waning strength of China's economy have been weighing heavily on many commodity and financial sectors in the current year. Economic pundits have repeatedly warned that China’s rapid growth since the global financial crisis are unlikely to be replicated in the next decade, particularly in sectors of property construction and local government investment.

Indeed, experts have also warned that China is poised to lose its prominence in global oil markets with India replacing it as the main driver of global demand growth. 

“China’s role as a global oil demand growth engine is fading fast,” Emma Richards, senior analyst at London-based Fitch Solutions Ltd, has told The Times of India. 

But fresh data coming from the Middle Kingdom suggests that these fears could be overblown--at least for now. Wall Street investment bank Goldman Sachs has, for several months now, reported that China’s demand for many major commodities has actually been growing at “a robust clip,” thanks in large part to its booming clean energy sector. 

China’s imports of energy commodities fell slightly in September compared to the previous month; however, they grew considerably compared to a year ago with crude oil imports up by 14.6%, natural gas increased by 8.2%, coal by 73.1% and iron ore by 6.7%. Crude oil imports clocked in at 11.13 million barrels per day (bpd) in September, down from August's 12.4 million bpd. That said, it's worth noting that imports in August were the third highest of any month on record so those comps were bound to be tough. Meanwhile, September imports were up 14% Y/Y while arrivals in the first nine months were 11.34 million bpd, good for a 14.6% Y/Y growth.

The one exception among major commodities was copper, where imports of the unwrought metal were down 9.5% for the first nine months of the current year compared to last year’s corresponding period thanks mainly to strong domestic production. Copper imports hit 480,426 metric tons in September, down 5.8% from 509,954 in September 2022 but up from August's 473,330. Unwrought copper imports for the first nine months of 2023 clocked in at 3.99 million metric tons, down 9.5%Y/Y.

China Dominating Global Clean Energy 

Meanwhile, China’s dominance in global clean energy markets does not appear in any imminent danger. 

Earlier in the year, Bloomberg New Energy Finance (BNEF) reported that an impressive $1.1 trillion flowed into the global clean energy sector in 2022. According to the clean energy watchdog, almost all sectors received record levels of investment, including renewable energy, energy storage, hydrogen, carbon capture and storage (CCS), electrified transport, electrified heat and sustainable materials spurred by a rush to attain energy security amid Russia’s war in Ukraine. BNEF also revealed that China spent $546 billion on renewables in 2022, nearly half the total global spend; more than triple the European Union’s total spend at $180 billion, and the United States’ $141 billion.

The trend shows no signs of turning around with China still dominating clean energy production.

June report by the Global Energy Monitor revealed that the country’s operating solar capacity has hit 228 GW, more than the rest of the world combined. China is now on track to double its wind and solar capacity a good five years ahead of its 2030 target.

China has poured over $50 billion into wafer-to-solar panel production lines, 10 times more than Europe, and also controls a staggering ~95% of the world’s polysilicon and wafer supply. Last year, the International Energy Agency warned of the dangers the world is exposing itself to by relying so heavily on the Middle Kingdom for its solar needs:

"The world will almost completely rely on China for the supply of key building blocks for solar panel production through 2025. This level of concentration in any global supply chain would represent a considerable vulnerability,” the agency wrote in a special report.

And, China’s economy is much greener than those of its peers despite constant criticism as the world’s largest polluter.

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BNEF has revealed that companies listed on the S&P 500 currently derive only about 3.4% of their revenue from clean energy, roughly half the figure by their peers on the  Shanghai Composite Index. Indeed, the Asia-Pacific region is home to nearly 700 companies that draw more than half their revenue from clean energy, which includes renewable and nuclear power, electrified transport, biofuels, hydrogen and carbon capture. That compares with just over 400 companies in the U.S. and slightly more in Europe, the Middle East and Africa combined.

Leading Chinese solar firms are enjoying roaring profits driven by strong demand and an uptick in panel sales: Jinko Solar Co. Ltd. (NYSE:JKS) reported a staggering 325% jump in net income to 3.8 billion yuan for the first half of the current year; Longi Green Energy Technology Co. Ltd, the world’s largest panel-maker, reported a 42% year-on-year jump in net profit to 9.2 billion yuan ($1.3 billion), Trina Solar Co. Ltd. saw its H1 202 profit soar 179% to 3.5 billion yuan while JA Solar Technology Co. Ltd. saw its net income rise 183% to 4.8 billion yuan.

By Alex Kimani for Oilprice.com

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