CHINA’s trade in major commodities in May underscored that price moves are the primary driver of changes in flows in the world’s biggest buyer of natural resources.
The headline-grabbing number from Monday’s customs data was the collapse in crude oil imports to an eight-year low of just 7.79 million barrels per day (bpd).
The fallout from the war in Iran was blamed for the 29% slump in crude imports. In the months prior to the start of the conflict on Feb 28, levels of around 11 million bpd were common.
The war resulted in the effective closure of the Strait of Hormuz, which sent Middle East crude oil prices sharply higher as at least 10 million bpd of supply was lost.
Brent futures have since moderated from a post-conflict high of US$126.41 a barrel to end at US$91.45 on Tuesday.
But the price of paper oil was well below the price of physical cargoes at the time when China would have been buying crude for May delivery.
Saudi Arabia, the world’s largest crude exporter, hiked the premium for its main Arab Light grade to a record high of US$19.50 a barrel over the regional Oman and Dubai benchmark for May-loading cargoes, a move that reflected the tightness prevailing at that time in physical markets with the Strait of Hormuz shuttered.
The premium for physical crude extended beyond just Saudi crude, meaning that Chinese refiners faced paying substantially more for cargoes for May delivery.
Instead of paying up, they chose to cut imports and turn to their vast inventories, built up in previous years when prices were lower and there were also substantial discounts on sanctioned crude from Russia, Iran and Venezuela.
The question is what will China’s refiners do now that prices for crude oil futures and premiums for physical cargoes have eased?
Will they try to increase imports and risk tightening the market and raising prices, or will they continue to tap into stockpiles?
While there is uncertainty over the next moves that China’s refiners may make, there is more clarity on the trade in metals.
High copper prices have trimmed China’s appetite for the industrial metal, with imports of unwrought metal dropping 1.3% in May from April to 446,000 tonnes.
Arrivals for the first five months of the year declined 7% to 2.01 million tonnes from the same period in 2025.
London copper contracts ended at US$13,615 a tonne on Tuesday and are up 9.6% so far this year.
In contrast to the soft demand for copper, China’s aluminium producers have been taking advantage of the higher prices sparked by the loss of Middle East supplies due to the Iran war by ramping up exports.
China shipped out 632,000 tonnes of aluminium in May, the most in a year and up 5.7% from the same month in 2025.
Exports for the first five months of the year jumped 10.4% to 2.69 million tonnes.
London aluminium futures ended at US$3,547.50 a tonne on Tuesday, and have gained 13% since the start of the Iran war.
Another commodity where price is driving import dynamics is coal, with China’s imports dropping 8% to 33.27 million tonnes in May from the same month a year earlier.
For the first five months of the year arrivals slipped 3.2% to 182.62 million tonnes.
The price of Indonesian thermal coal with an energy content of 4,200 kilocalories per kg on the Singapore Exchange was US$65.13 a tonne on Tuesday.
This grade is popular with Chinese utilities and it has risen 43% since the end of last year, with much of the gain coming after the start of the Iran war, which pushed prices higher in the expectation that more Asian countries would turn to coal over natural gas. — Reuters
Clyde Russell is a columnist for Reuters. The views expressed here are the writer’s own.
