China’s commodities output roars ahead as economy reopens

China’s energy and commodities output roared ahead in March as producers rushed to feed a revival in economic activity.

The increases, which included records for a single month’s data for coal mining, natural gas output and oil refining, broadly tally with a robust set of import figures last week. But it’s clear that for many markets the additional supply is running ahead of actual consumption in what’s proving to be an uneven recovery. Underpinning the gains was a surge in power demand as electricity generation climbed 5.1% on year, according to the statistics bureau on Tuesday.

China’s reopening after the constraints of Covid Zero saw the economy grow 4.5% in the first quarter, handily beating expectations but short of Beijing’s 5% annual target. Property investment continued to contract, a warning sign given the sector’s importance to commodities markets. Retail sales in March shot higher while industrial production missed expectations.

The steel market in particular is heavily keyed to indications of building activity, especially ahead of the busy season for construction in the second quarter. Output in March rose 6.9% on year to 95.7 million tons, near a two-year high, although this is one of the markets where demand has so far disappointed.

Oil processing rose 8.8% to 63.3 million tons, an all-time high for a single month’s data, as refiners lifted runs to feed post-Covid transport demand, although a recent pullback in diesel consumption tied to trucking is another indicator of China’s patchy recovery.

China’s focus on energy security also saw coal miners raise output to record levels despite some short-lived disruptions from deadly accidents. Production increased 4.3% to 417 million tons. Natural gas output rose 4% to 20.5 billion cubic meters, a record for a single month, but a bit weaker than the daily average recorded in January-February’s combined figures when temperatures were colder. Crude oil drilling, meanwhile, topped 18 million tons for the first time since 2015.

Aluminum output rose 3% as smelters resumed production in southern provinces after local power shortages eased.

The Week’s Diary

Tuesday, April 18

• China industrial output for March, including steel & aluminum; coal, gas & power generation; and crude oil & refining. 10:00
  • Retail sales, fixed assets investment, property investment, residential property sales, and jobless rate for March
    • 1Q GDP
    • 1Q pork output and inventory levels
• Farm ministry briefing in Beijing on promoting best crop varieties, 10:00
• China’s 2nd batch of March trade data, incl. agricultural imports; LNG & pipeline gas imports; oil products trade breakdown; alumina, copper and rare-earth product exports; bauxite, steel & aluminum product imports
• Shanghai auto show, runs through April 27
• SMM Intl Aluminum Summit in Zhengzhou, Henan. Day 1

Wednesday, April 19

• CCTD’s weekly online briefing on China’s coal market
• Shanghai auto show, runs through April 27
• SMM Intl Aluminum Summit in Zhengzhou, Henan. Day 2

Thursday, April 20

• China sets monthly loan prime rates, 09:15
• China March output data for base metals and oil products
• China’s 3rd batch of March trade data, including country breakdowns for energy and commodities
• Fenwei hosts intl thermal coal summit in Qinhuangdao
• Shanghai auto show, runs through April 27
• SMM Intl Aluminum Summit in Zhengzhou, Henan. Day 3
• EARNINGS: CATL, Shougang

Friday, April 21

• China weekly iron ore port stockpiles
• Shanghai exchange weekly commodities inventory, ~15:30
• Shanghai auto show, runs through April 27
• SMM Intl Aluminum Summit in Zhengzhou, Henan. Day 4

Saturday, April 22

• Shanghai auto show, runs through April 27

Sunday April 23

• Shanghai auto show, runs through April 27
• EARNINGS: Jiangsu Shagang

On the wire

Iron ore rose as stronger-than-expected Chinese economic growth aided sentiment and the nation’s peak construction season continued to eat into inventories.

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