African exports to China fall amid weakened demand for minerals despite attempts to rebalance trade
- Observers attribute the 11.8 per cent drop to a subdued Chinese economy, commodity stockpiles and a mining dispute in the DRC
- The decrease comes in spite of Beijing’s pledge to buy more goods from Africa and several deals allowing tariff-free agricultural imports from the continent
China’s imports from Africa fell by 11.8 per cent to US$35.5 billion in the first four months of this year compared to the same period last year because of weakened demand for minerals and lower commodity prices – a trend analysts attributed in part to a subdued economic recovery in China and a Congolese mine dispute.
Meanwhile, Chinese exports to Africa rose 26.9 per cent to US$58.9 billion during the same period, thanks to China’s reopening after three years of tough Covid-19 restrictions. According to customs data, two-way trade grew 8.9 per cent to US$94.4 billion during the four-month period.
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Carlos Lopes, a professor at the University of Cape Town’s Mandela School of Public Governance and a former executive secretary of the UN Economic Commission for Africa, said minerals and fossil fuels had typically made up a large proportion of China’s imports from Africa, but the Covid-19 pandemic and other factors had affected the market.
“The slowdown of the Chinese economic growth due to prolonged lockdowns and geopolitical turbulence perturbing the value chains has significantly increased the stocks of minerals in China and reduced demand for all commodities,” Lopes said.
Cobalt controversy
In July, a court-appointed administrator stopped exports from the mine until shareholders could agree on a new sales contract. CMOC Group announced last month that it had resolved the 10-month dispute with Gecamines.
It is estimated that the Tenke mine generates about 1,500 tonnes (1,653 tons) of cobalt and 20,000 tonnes of copper each month. CMOC Group is estimated to have stockpiled at least 16,000 tonnes of cobalt hydroxide since exports were halted.
Prices for cobalt hydroxide have dropped from a high of US$76,145 per tonne in April 2022 to just US$18,519 per tonne in April of this year, according to Benchmark Mineral Intelligence. And the release of the stockpiled cobalt onto the market could drive prices even lower.
Rebalancing act
South Africa has bucked the trend in trade with China, with both imports and exports growing by double digits so far this year. In the first four months, China’s imports from South Africa rose 17 per cent to US$10.8 billion while exports increased by 21 per cent to US$8.4 billion.
Lopes noted that China had made new investments in South Africa and taken a renewed interest in BRICS – the bloc of leading emerging markets consisting of Brazil, Russia, India, China and South Africa.
“China in the quiet has also been helping some debt-stressed African countries that could have defaulted. It is doing it in a context of competitive behaviour towards Africa by key actors,” Lopes said.
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Charles Robertson, global chief economist at investment bank Renaissance Capital, said he suspected the drop in imports from Africa was either related to the DRC mine dispute or reflected lower year-on-year oil prices in the spring.
But he said China seemed “happy to pay lip service” to the idea that it would buy more African exports.
“But in reality China lends billions, which Africa must repay with foreign currency, but China doesn’t buy their exports so Africa can’t get that foreign currency. By contrast the US runs a current account deficit while exporting its capital,” Robertson said.
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Mark Bohlund, senior credit research analyst at REDD Intelligence, said the trade data stood in contrast to the general picture of the Chinese reopening as stronger than many expected in the first quarter of 2023, while several major African economies suffered under heavy debt loads.
“African exports to China are depressed by both lower commodity prices as well as lower output in key export sectors, such as oil in Algeria and Angola and copper in the DRC and Zambia,” Bohlund said.
He said the sharp increase in Chinese exports to Africa this year was surprising.
“It could be explained by African consumers substituting imported goods from other regions for cheaper Chinese alternatives or Chinese exporters taking advantage of higher inflation in developed markets to raise prices,” Bohlund said.
“Nonetheless, I still think it indicates that African growth has been stronger than indicated by some of the news headlines so far this year. It will likely be several months before this is confirmed, or refuted, in first-quarter GDP data from many of the key economies.”
The drop in imports from Africa tracks a general trend in China, where imports contracted in April, showing signs of weak demand despite the lifting of Covid-19 restrictions. Imports into the country dropped by 7.9 per cent year on year in April, while exports grew 8.5 per cent, according to Chinese customs data.
Data showed that imports of coal, natural gas, steel, copper and crude oil – key indicators of economic performance – dropped in April.
China’s crude oil imports fell in April to the lowest level since January. Crude imports totalled 42.41 million tonnes or 10.3 million barrels per day – a 1.45 per cent drop from the 10.5 million barrels a day of crude imported last April. The drop was attributed to the closure of refineries for maintenance and the build-up of crude inventories.
