In March, China experienced a significant energy and commodity output boom as producers scrambled to accommodate the resurgence of economic activity. This remarkable growth included record-breaking monthly data for coal mining, natural gas production, and oil refining. While the increase in supply has outpaced consumption in some markets, it highlights the uneven nature of China’s ongoing economic recovery.
Power Demand Fuels Energy Output Expansion
The driving force behind this growth is a surge in power demand, with electricity generation increasing by 5.1% year-on-year, as reported by the statistics bureau. This uptick in energy consumption is due to China’s reopening following the Covid Zero containment strategy, resulting in a 4.5% economic growth in the first quarter. Although this growth surpasses expectations, it falls short of Beijing’s 5% annual target.
Despite a contracting property investment sector, retail sales in March significantly increased. However, industrial production did not meet expectations. The steel market, closely linked to construction activity, has been closely monitored as the busy construction season approaches in the second quarter.
Steel output in March rose by 6.9% year-on-year, reaching 95.7 million tons—near a two-year high—though demand has yet to meet expectations in this market.
Record-breaking Oil Processing Amid Fluctuating Demand
Oil processing experienced an 8.8% increase to 63.3 million tons, setting a new record for single-month data, as refiners elevated production to accommodate post-Covid transportation demand. However, a recent decline in diesel consumption related to trucking highlights the unpredictable nature of China’s economic recovery.
In pursuit of energy security, China’s coal miners have increased output to record levels, even amidst short-lived disruptions caused by fatal accidents. As a result, coal production rose by 4.3% to 417 million tons.
Natural gas output also experienced a 4% increase, reaching 20.5 billion cubic meters—a new monthly record, although slightly weaker than the daily average observed in January and February during colder temperatures. In addition, crude oil drilling exceeded 18 million tons for the first time since 2015.
Aluminum production increased by 3% as smelters in southern provinces resumed operations following the resolution of local power shortages. Iron ore production also rose due to stronger-than-anticipated Chinese economic growth and the ongoing peak construction season, which depletes inventories.
China’s Energy and Commodities Output Reflects an Uneven Economic Recovery
While China’s energy and commodity sectors have experienced unprecedented growth in recent months, this rapid expansion highlights the uneven nature of the nation’s economic recovery.
As the country continues to reopen and navigate the post-Covid landscape, producers must strike a delicate balance between meeting fluctuating demand and adjusting output to ensure long-term stability in the energy and commodities markets.
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