[ad_1]
China has tried to curb the surge in commodity prices by releasing stocks from its strategic reserves. Higher prices for petroleum, coal and metals have raised manufacturing costs, slowed the growth of factory activity, and increased inflation among the world’s largest commodity consumer. Every week since April this year, Chinese authorities announced measures control the price of many commodities, including energy and metals.
With all of these auctions and the reported releases of crude and coal from China’s strategic reserves, the market is dying to know how much the world’s largest consumer has secretly stored in recent years.
China is unwilling to declare strategic reserves of anything, including crude oil. So, in most cases, analysts play a game of estimates, calculations, and conclusions from past behavior to try to measure Chinese stocks of strategic commodities, such as crude oil, coal, carbon, copper, zinc and cobalt.
Knowing how much crude oil and metals China may have hidden could be particularly useful for analysts and traders in the commodities market.
Some of them have made estimates.
According to consultancy firm Energy Aspects, China is forecast to have 220 million barrels of crude oil in its Strategic Petroleum Reserve (SPR), covering 15 days of China’s crude demand. Total crude inventories, including commercial inventories, are enough to cover 60 days of Chinese oil demand, Energy Aspects analyst Liu Yuntao told Reuters.
Related: Senior US Negotiator: Iran Nuclear Deal Might Be Impossible
That’s lower than the recommendation of the International Energy Agency (IEA), which calls on all members to hold a minimum of 90 days of crude reserves. But China is not a member of the IEA.
For metals, China’s strategic reserves are estimated at 1.5 million to 2 million tonnes of copper, 800,000 to 900,000 tonnes of aluminum and 250,000 to 400,000 tonnes of zinc, according to analysts quoted by Reuters. China is also believed to have around 7,000 tonnes of cobalt, a key metal used in making batteries.
Since China rarely declares stocks of raw materials, the market is often left guessing how China’s imports of crude oil – and the import of key metals such as copper or iron ore – will evolve in the coming months.
More than the amount of each commodity held by China, the market is examining how Chinese authorities have handled these commodities this year amid rising commodity prices.
China was tap into the coal reserves to avoid shortages as coal prices soar on tight supplies. Soaring coal prices are affecting the downstream sector and the real economy, according to the Chinese state planning body.
China would also released over 20 million barrels of crude oil from its strategic reserve in an attempt to curb the recent rise in oil prices. Chinese crude oil imports started to cool down as prices went up. From now on, its crude freed from the strategic reserve could further weaken Chinese imports.
In addition, China has freed stocks of metals from its reserves to lower prices which increase manufacturing costs.
Analysts believe this attempt to manage commodity prices is only effective in the short term.
“The recent measures taken by the Chinese authorities have succeeded in framing part of the prices of raw materials,” said Frederic Neumann, co-head of the Asian economy at HSBC. Reuters.
“Basically, however, commodity prices are determined by global supply and demand, which Chinese officials can only influence indirectly,” Neumann added.
China is also showing signs of a slowing demand for metals, which could cause copper and iron ore prices to fall for the remainder of the year after a meteoric rally in the first half of the year. Chinese factory activity growth slowed to a 15-month low in July, and imports of copper and iron ore are also slowing due to soaring prices and planned government restrictions on manufacturing. steel in China.
Demand for most commodities in China is expected to slow in H2 2021, Wood Mackenzie noted in a new China Economic Focus monthly report last week.
“The Chinese economy is expected to slow in the second half of 2021. Slowing export growth, rising commodity prices, weak infrastructure investment and the expiration of subsidies will all weigh on the country’s GDP growth. . As a result, we should see a deceleration in demand for commodities in China, ”said Wood Mackenzie senior economist Yanting Zhou.
By Tsvetana Paraskova for OilUSD
More reads on Oil Octobers:
[ad_2]
Source link