For the past 20 years, the mantra in the commodities industry has basically been: if you make it, China will buy it.
This is still true to some extent, the world's largest importer of natural resources remains a giant.
But the nature of China's demand for commodities is starting to change, and the trends seen in 2023 are likely to continue next year.
The main change is that China is becoming an increasingly sensitive buyer and seems more willing to use its purchasing power to influence.
This can be seen from China's ** imports, which show two different stages in 2023.
In the first half of the year, the world's largest oil importer snapped up large quantities of cargo and significantly increased oil reserves, despite a rapid increase in refining processing to meet increased domestic fuel consumption and increased exports of refined products.
But after Saudi Arabia and Russia voluntarily cut production by 1.3 million barrels (b/d) since July, China began to cut back on imports, a move that triggered a strong global oil price**.
*Imports peaked in August at 12.43 million barrels per day, but that was for shipments scheduled in May and June, when ** was at a 2023 low.
Since then, imports have gradually decreased, falling to 10.33 million b/d in November.
China did not disclose changes in its commercial or strategic oil stocks, but it is likely that refiners are using them while cutting imports.
The decline in China's oil imports also means that the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) may be overly optimistic about strong growth in global demand.
However, given the pullback in recent weeks, China's imports are also likely to accelerate in the first quarter of 2024.
In Wednesday's trading, the global benchmark Brent*** fell to 72$29 barrel at a seven-month low, up from 97 on Sept. 28$69 barrel is 2023 high** up 26%.
If past experience is any guide, weaker conditions will prompt Chinese refiners to get more cargo, even if some of that oil will be used to replenish inventories.
Metals
However, China's ability to influence commodities has not always been as successful as Beijing had hoped, with iron ore being a good example.
Unlike China, which can source from multiple producing countries, iron ore is highly concentrated, dominated by only two producers, Australia and Brazil.
China is also currently short of large inventories, with port inventories falling to a seven-year low last month.
This means that when the demand in the iron ore and steel markets, and even the market sentiment, improves, China has no choice but to put up with ***
For 2024, this could mean continued strength in iron ore**, especially if Beijing's efforts to revive key property sectors start to bear fruit.
2023 has also shown that China is an opportunistic buyer of commodities, with copper being a good example.
Imports of unwrought copper fell by 5 in the first 11 months of the year compared to the same period in 20229%, but the monthly pattern fluctuates again.
At the beginning of 2023, China's copper imports have weakened, and at the same time, the global market for this industrial metal is also **.
However, with the decline in the second half of the year, imports began to increase, rising to 550,565 tonnes in November, the highest level this year.
Thermal coal is another example of China buying coal from the seaborne market because it is competitive relative to domestic.
Although China needed more coal to generate electricity due to low hydropower production, it was able to turn to imports to make up the shortfall, and China's coal** was not pushed higher as demand from other major buyers such as India and Europe was weakening.
In the first 11 months of 2023, China's coal imports of all grades increased by 62% year-on-year8%。
But whether this momentum can be sustained next year will depend on whether hydropower** improves and whether seafaring** remains competitive with domestic benchmarks**.
Another factor to consider is China's rapid rollout of renewable energy in the form of wind and solar.
While China is still increasing thermal power capacity, mainly coal-fired power generation, it is likely to add enough renewable energy capacity in 2024 to allow accelerated retirement of old coal power plants.
The overarching theme is that China will remain a major buyer for many commodity markets, but it is likely to be more serious than it has been over the past 20 years, where demand to support rapid growth has outweighed any other concerns.