China’s tricky Commodities: Stockpile mysteries

Since April this year, the Chinese government has announced a part to regulation the price of many commodities. This includes metals and energy.

China has been trying to stem the rise in commodity rate by using strategic stocks from reserves. High prices for oil, coal and metals have increased production costs and inflation in the world’s largest commodity industry.

As Frederic Neumann, co-head of Asian Economics at HSBC, informed Reuters – “Recent steps by Chinese authorities have succeeded in skimming some froth off commodity prices.” As he mentioned, prices for raw materials are driven by global supply and demand. The international market can’t wait to know how much one of the world’s most important consumers have secretly stockpiled in recent years.

Although the clandestine statistics, researchers are trying to divulgence China’s commodity mysteries and to calculate the country’s possible reserves in this direction by approximate figures.

Approximate estimates/Statistics

Consultancy Energy Aspects, reports that China may have 220 million barrels of crude oil in its strategic petroleum reserve (SPR). This can cover 15 days of China’s need. Total stockpiles are sufficient to cover 60 days of Chinese energy aspects and oil demand.

IEA (International Energy Agency) asks for all representatives to hold 90 days of crude reserves. However, it is should also be noted that China is not a member of the IEA.

Chinese strategic reserves may have 800,000-900,000 tons of aluminium, 1.5 million to 2 million tons of copper and 250,000-400,000 tons of zinc. Consultancy Energy Aspects added that China might also have around 7,000 tons of cobalt.

According to Yanting Zhou, the senior economist of Wood Mackenzie, “China’s economy is likely to slow down in H2 2021.” As Yanting says,  As a result, Demand for goods in China may reduce..”

To avoid shortages, coal reserves are used in China as coal prices rise in stocks. The country has also released more than 20 million barrels of crude oil from its important reserve. The fact is that with rising prices in China, crude oil imports have lessened. Now, The depletion of strategic reserves from oil may further weaken China’s imports.

China is trying to deplete its supply of metals from reserves, leading to rising production costs.

However, analysts see this as effective only in the short term.

China seems to have a slowdown in demand for metals. In 15 months, the activity of the Chinese factory was the lowest in July.

Despite the great interest, China does not disclose this information and therefore, analysts have to find approximate types of estimated information on how much oil and metal can be stored in the land.

According to Wood Mackenzie’s last week report, demand across most commodities in this country is likely to slow down in the second half of 2021.

The latest results we will see by the end of the year. Until then we just have to take a closer look at the sources and check the statistics which might not be too far from China’s commodity mystery.