China's Energy Imports Plunge in April Due to Strait of Hormuz Disruption

Due to the near-total disruption of shipping through the Strait of Hormuz, a vital corridor for crude oil and natural gas, China's energy imports saw a sharp decline in April. According to customs data released last Saturday, crude oil shipments fell 20% year-on-year, with petroleum imports also dropping below the previous month's levels. These figures include oil that had already begun shipping from the Gulf prior to the US-Israeli airstrikes on Iran on February 28. The Middle East typically accounts for about half of China's crude oil imports and nearly one-third of its liquefied natural gas (LNG).

The first batch of monthly customs data did not distinguish between seaborne LNG and pipeline gas delivered overland. However, analysis of vessel tracking data indicates that LPG purchases in April fell to their lowest level in eight years. Concerns over potential oil shortages in the world's largest energy buyer have prompted the Chinese government to prioritize refined products such as diesel and gasoline for domestic use. As a result, petroleum product exports in April plunged year-on-year to their lowest level in nearly a decade. Disruptions in natural gas supply have driven up demand for alternative energy sources such as coal. However, China's coal purchases dropped to the lowest since June of the previous year, as the country relied on its substantial domestic production rather than seeking higher-priced imports.

The Persian Gulf is also a major supplier of aluminum. However, China's position as the world's leading producer has allowed it to fill part of the gap, with exports rising. In contrast, steel exports declined, partly due to the fact that the Middle East had recently become a significant buyer of Chinese steel products. Meanwhile, China's copper imports edged up, benefiting from a drop in international prices in March, as the war heightened concerns over global economic growth. However, copper concentrate imports fell by about one-fifth compared to the record levels of the previous year. Iron ore imports were slightly higher, while soybean imports grew by nearly 40%, relying largely on US shipments along with seasonal volumes from Brazil.

In April, China's total exports of strategic minerals increased, with one major Chinese metal refinery seeing strong demand for platinum to settle new local futures contracts, indicating that the product is attracting more platinum into the Chinese market. China's clean technology giants, eager to access export markets to boost weak profits, are not willing to let the crisis go to waste. Meanwhile, the global green transition in the steel industry is being threatened by continued spending on coal production and underinvestment in clean technologies.