Mystery surrounding Chinese stockpiles of commodities deepens

Every week since April this year, Chinese authorities have announced measures to control the price of many commodities, including energy and metals.  China has been trying to cool surging commodity prices by releasing inventory from its strategic reserves. The higher prices of oil, coal and metals have raised manufacturing costs, slowed down factory activity growth, and increased inflation in the world’s largest commodity consumer.

China has not been forthcoming in reporting strategic reserves of anything, including crude oil. So, in most cases, analysts are playing a game of guesstimates, calculations, and conclusions from past behavior to try to measure Chinese stockpiles of strategic commodities, such as crude oil, coal, copper, zinc, and cobalt. 

According to consultancy Energy Aspects, China is forecast to have 220 million barrels of crude oil in its strategic petroleum reserve (SPR), covering 15 days of China’s crude demand. Total crude stockpiles, including commercial inventories, are enough to cover 60 days of Chinese oil demand, Energy Aspects analyst told Reuters. 

For metals, Chinese strategic reserves are seen at 1.5 million to 2 million tonnes of copper, 800,000-900,000 tonnes of aluminum, and 250,000-400,000 tonnes of zinc, according to analysts quoted by Reuters. China is also thought to have around 7,000 tonnes of cobalt, a key metal used in battery manufacturing.  

Since China rarely reports any commodity inventories, the market is often left guessing how Chinese crude oil imports—and import of key metals such as copper or iron ore—will trend in the coming months.  

More than how much of each commodity China holds, the market is looking at how Chinese authorities have been managing these commodities this year amid a rally in commodity prices. 

China has been tapping into coal reserves to prevent shortages as coal prices soar on tight supplies. The surging price of coal is affecting the downstream sector and the real economy, according to the Chinese state planning body.

China has also reportedly released more than 20 million barrels of crude oil from its strategic reserve in a move designed to curb the recent oil price rally. China’s crude oil imports began to cool as prices rallied. Now, its crude released from the strategic reserve could weaken Chinese imports further.  In addition, China has been releasing metals stocks from reserves to pull down rallying prices that raise manufacturing costs. 

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