China’s industry and foreign trade drive global maritime transport

By Marek Grzybowski

Retail sales in China rose 2.7% in July from a year earlier, beating forecasts for a 2.6% increase in a Reuters poll. Industrial production rose 5.1%. In fixed asset investment, the burden on real estate worsened, falling 10.2% year-on-year in July, compared with a 10.1% decline in June.

China’s economy grew 5.2% in 2023. That’s a significant increase compared to 2022, when the PRC economy grew by just 3%. This is the result of industry and trade adjusting to lockdowns and disruptions caused by the coronavirus. This is one of the country’s slowest economic growths in more than three decades, notes Laura He of CNN’s Hong Kong branch. It should be noted that 30 years ago, the PRC’s GDP was $310 billion, and in 2023 it will be almost $17,800 billion.
China’s foreign trade (in USD) increased by 2.9% year-on-year in H1. Exports increased by 3.6% y/y), and imports increased by 2% y/y. The positive trade balance increased by 7.9% y/y to over USD 550 billion. This situation is of course reflected in maritime transport and ports, as we wrote here
– China’s trade surplus last month broke the record set in July 2022, when the country’s factories and ports [and ship operators – MG] raced to catch up with global demand after a strict Covid-19 lockdown in Shanghai paralyzed production in most of central China – Keith Bradsher reports from Beijing for the NY Times.

 

Export – growing dynamically
China’s trade surplus with the United States rose to nearly $32 billion last month, up from $29 billion a year earlier, as China exported more and bought less. The surplus with the European Union reached $22.6 billion in June, up from $19.1 billion in the same month a year earlier.

Factories in China already produce almost a third of the world’s manufactured goods. Xi Jinping, the country’s supreme leader, has set a national goal of fostering “new-generation manufacturing forces,” emphasizing building even more factories with large numbers of robots and other automation.
“July was the fourth straight month of growth in dollar terms, up 7% year-on-year. However, growth was higher in June, at 8.6% year-on-year. The July increase in imports by as much as 7.2% y/y is surprising – informs Andrzej Zawadzki-Liang on the China24 portal, citing data published by the Chinese General Administration of Customs.

In the first seven months of this year, foreign trade with Southeast Asian countries (ASEAN) has increased (in RMB terms) by 10.5% y/y. This economic region is the largest trading partner of the People’s Republic of China. In trade with European Union countries, after a decline in the first six months, a seven-month increase (thanks to July results) of 0.4% y/y has been recorded. Imports from the EU are still falling (by 1.5% y/y), but at a slower pace than in the six-month period, when a decline of 2.9% y/y was recorded. With the third economic partner of the People’s Republic of China, the United States, China’s foreign trade turnover increased by 4.1% y/y, with exports higher by 5.1% y/y and imports by 1.2% y/y. Such dynamically developing industry and exports require raw materials. The People’s Republic of China also dominates and dictates the rules of the game in this market. This is particularly visible in the energy resources market, where maritime transport had to quickly adapt to the high demand for imports of certain groups of raw materials.

Ore and Steel in Industry and Sea Ports
In June 2024, China imported 97.6 million tons of iron ore, which was 2.2% more than last year, reports Banchero Costa based on data from Chinese customs. Iron ore imports to China in January-June 2024 amounted to 611.6 million tons, which was 6.1% more compared to the same period in 2023. Total iron ore imports to China in 2023 amounted to 1,181 million tons, which was 6.6% more year-on-year compared to 2022.

Increased ore imports are also a significant challenge for bulk terminals and seaports. In June 2024, Chinese iron ore stocks in major ports amounted to about 148.6 million tons, which is an increase of 16.2% year-on-year. In H1 2024, average Chinese iron ore stocks in major ports amounted to 137.8 million tonnes, up 3% year-on-year compared to the same period in 2022.

  

Despite increased iron ore imports, the Chinese steel industry operated at the same level as a year earlier. In June 2024, Chinese crude steel production amounted to 91.2 million tons, up 0.1% year-on-year, according to data from the National Bureau of Statistics, cited by Banchero Costa Research. Total crude steel production in China in the first half of 2024 amounted to 526.2 million tons, down 2.2% compared to the same period in 2023. Crude steel production in China in the whole of 2023 amounted to 1,020 million tons, up only 0.9% compared to 2022. In June 2024, China imported 0.6 million tons of steel products, down 6.6% year-on-year, according to data from the Chinese customs service. In the period January-June 2024, imports amounted to 3.6 million tons and were 2.9% lower year-on-year. For comparison, in June 2024, China exported 8.7 million tons of steel products. This was 16.4% more year-on-year. Exports of steel products in the first half of 2024 amounted to 53.4 million tons and were 21.7% higher year-on-year. This shows that many countries, including European ones, including Poland, are becoming dependent on supplies of steel products from the PRC.

Energy for Industry
In June 2024, China imported 44.6 million tons of coal, up 11.9% year-on-year. In January-June 2024, coal imports to China amounted to 249.6 million tons, up 12.4% year-on-year compared to the same period in 2023. Total coal imports to China in 2023 amounted to 474 million tons, up 61.8% year-on-year compared to 2022. For comparison, coal production in China in January-June 2024 amounted to 2,265.5 million tons. In 2023, Chinese miners extracted 4,678 million tons of coal. This was 4.3% more compared to 2022.
Industry needs energy and in June 2024, total energy production amounted to 768.5 TWh. This was 3.9% more y/y, according to data from the National Bureau of Statistics. In the first half of 2024, the PRC energy sector produced 4,411.2 TWh and this was 6.2% more energy compared to the same period in 2023. In 2023, total energy production in China amounted to 8,855 TWh more by 6.1% compared to 2022.
Crude oil imports to China in the period January-June 2024 amounted to 275.5 million tons, which means a decrease of 2.4% y/y. In 2023, China imported 564 million tons of crude oil, which means an increase of 11.0% y/y. China’s domestic oil production in H1 2024 was 107 million tons (+1.7% y/y). In 2023, domestic oil wells produced 209 million tons. This was 2.1% more crude oil y/y.
In June 2024, China imported 3 million tons of oil products, down 32.5% y/y, according to Banchero Costa based on data from the Chinese customs service. In H1 2024, product imports amounted to 25.3 million tons, up 12.1% y/y. In June 2024, China exported 5.4 million tons of oil products, up 19.1% y/y.
Exports in January-June 2024 amounted to 30.1 million tons, up 3.8% y/y. The increase in exports of products from Chinese refineries is also the result of countries becoming dependent on China’s petrochemical production. This also means increased work of fuel terminals and ships to transport products, which we wrote about here 

Total LNG imports to China in January-June 2024 amounted to 38.3 million tons, up 13.8% year-on-year. LNG imports to China in 2023 amounted to 72 million tons. Chinese industry demand for LNG increased by 12.6% year-on-year compared to 2022. China is one of the most important players in the bauxite and alumina market. In January-June 2024, the Chinese economy imported 77.5 million tons of bauxite and alumina. This was an increase of 7.3% year-on-year. Total imports of these raw materials to China in 2023 amounted to 142 million tons, up 12.7% year-on-year compared to 2022.

Industry drives exports
According to data from the World Bank and the General Administration of Customs of China, the export of industrial products accounts for over 90% of China’s total exports. So the Chinese economy is based on a completely different trade structure than many Asian countries and the southern hemisphere of our globe. We wrote about it here 

– In 2023, China exported industrial products worth RMB 23.51 trillion (approximately USD 3.68 trillion), while the total value of exported goods amounted to RMB 23.77 trillion (approximately USD 3.71 trillion), reports Arendse Huld in “China Briefing”, with industrial products accounting for 98% of all Chinese exports.
This information shows the independence of the Chinese economy from the industrial products of other countries and the scale of dependence of other economies on the supply of industrial products from the Middle Kingdom. We saw this during the Covid-19 pandemic, when entire industries came to a standstill for weeks. Many countries have liquidated their own industries and are becoming dependent on supplies of products from Chinese steel mills.
In addition to the dependence on industrial products, some economies are beginning to become dependent on refined products. The chemical industry of some countries is becoming increasingly dependent on supplies from China. This can be seen by following the growing demand for product carriers and observing the routes of these ships.
From the cited fragmentary data it is clear that leading economies depend on efficient logistics connections, in which maritime transport and sea ports play an important role. And at the same time we have an answer to the question: should we invest in the modernization of ports and the construction of transshipment terminals?