Crude, iron ore relative China winners in 2013: Clyde Russell

Dec 17 2012, 16:27 IST
Comments 0
SummaryEnergy over metals, raw over refined, sums up the likely theme for China's commodity demand next year.

Energy over metals, raw over refined, sums up the likely theme for China's commodity demand next year.

Commodity markets had become accustomed to China as a voracious consumer of resources, but 2012 showed that growth rates can slow, a trend likely to continue next year, but it won't be evenly spread.

The broad macro-economic situation as the new year approaches should provide guidance as to where the likely winners lie for 2013.

Recent economic data suggest that China is regaining growth momentum and this is being led by infrastructure spending and consumer demand, and less so by the traditional powerhouse of exports of manufactured products.

This isn't really much of a surprise as the Chinese authorities have been clear they want a more consumer-led economy over the longer-term.

And over the shorter-term, infrastructure spending is the quickest way for large state-owned enterprises and governments to quickly boost activity after the economy slowed a little more than anticipated in the middle of 2012.

Consumer spending in China tends to mean more vehicles as personal transport is still an aspiration for the ever-growing middle class, with car sales rising 6.9 percent in the year to end-October.

This alone will boost China's fuel use, but it's not refined products that are the likely big winner in 2013, it will be crude demand.

China has been commissioning new refinery units at a rapid pace, with more than 1 million barrels per day (bpd) expected to be added in 2012, and a further 600,000 bpd planned for next year.

China's refinery throughput hit a record 10.13 million bpd in November, but it's unlikely that actual fuel consumption is quite as high.

What appears to have been happening is that the Chinese have been rebuilding product stockpiles that were run down in the period of midyear weakness.

However, what happens when inventories are at comfortable levels will be key for the outlook.

The Chinese will either cut runs to closer to actual demand, or start exporting refined products. The first is still positive for crude imports, as actual demand will be close to 9.8 million bpd in 2013, according to International Energy Agency forecasts.

Given domestic crude production of about 4 million bpd, this means monthly crude imports will have to average at least 5.8 million bpd, about 400,000 bpd more than the average for the first 11 months of 2012.

This could be further boosted by small refiners obtaining licences to directly import crude, rather than using fuel oil

Single Page Format
Ads by Google

More from Commodities

Reader´s Comments
| Post a Comment
Please Wait while comments are loading...