Chinese commodities show road to recovery

Bloomberg

From oil to copper to coal, China’s gigantic commodities industry is signalling that the first economy to be flattened by the coronavirus is getting closer to a return to normality.
Bloomberg Economics estimates that most of China was 90%-95% back to work at the end of last week, noting pick-ups in the steel market, construction activity and crude processing. Those oil refineries, as well as coal-fired power plants, are nearing last year’s operating rates, while metals stockpiles have shrunk from record or near-record levels.
It’s a three-month cycle of collapse and recovery marked by perhaps the most heartening milestone for those nations still fending off the worst of the virus: China has now reported zero new Covid-19 deaths for the first time since January.
Throughput at state-owned oil majors and independent refiners is likely to rise to 13 million barrels a day this month from 12 million in March, according to senior officials at the nation’s top processors. That’s nearing the 13.4 million barrels a day averaged over last year. State-owned giants such as Sinopec are preparing to restore more capacity as the central government pushes for a recovery in industrial activity to shore up economic growth, while some idled private oil refiners, known as teapots, will resume processing in April.
China’s drivers have returned to the roads in greater numbers than this time last year as social distancing encourages more people to use their own cars instead of public transportation, according to BloombergNEF.
Road to Recovery
An exception is that drivers appear to be avoiding non-essential journeys. That’s evidenced by TomTom Traffic Index congestion data, which show a precipitous drop outside rush hour, and by highway traffic during this past weekend’s tomb-sweeping holiday. Vehicles were way down compared to last year as the government advised people to stay away from ancestral burial sites.
The daily coal burn at select coastal plants has doubled from early February and the height of the country’s lockdown to arrest the spread of Covid-19. The plants are responding to resurgent electricity demand as factories restart in the world’s second-largest economy.
At the same time, China’s buyers of liquefied natural gas have become some of the most active in the market, signalling a turnaround from February, when the country’s top importers sought to delay or cancel shipments due to demand and logistical constraints caused by the outbreak.
The increase is mainly from smaller utilities, which are trying to take advantage of cheap gas while their bigger counterparts struggle to consume all of their contracted supply, said BNEF analyst Lujia Cao.