China’s Commodity Buying Spree
Strong buying by China has helped lift commodity prices around the world this spring, but growing evidence suggests that a sizable portion of this buying has been to build stockpiles in China, and may not be sustainable.
At least 90 large freighters full of iron ore are idling off Chinese ports, where they face waits of up to two weeks to unload because port storage operations are overflowing, chief executives of shipping companies said in interviews this week. Yet actual steel production from that iron ore is recovering much more slowly in China, and Chinese steel exports remain weak.
Commodities and shipping executives describe Chinese stockpiling in recent months of a range of other commodities as well, including aluminum, copper, nickel, tin, zinc, canola and soybeans. Starting in April, China began stockpiling significant quantities of crude oil.
China’s goals vary by commodity. Chinese companies have bought iron ore heavily on the spot market in anticipation of higher prices in annual contract talks now nearing completion. The Chinese government has been stockpiling oil and some metals for strategic reasons, and bought huge quantities of aluminum and canola to insulate domestic producers of these goods from falling global prices over the winter.
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