The European Business Council for Africa

  • Chinese customs data shows exports to the continent edged up 0.6 per cent in first 11 months, but imports from Africa plunged 23 per cent
  • Analysts say it was driven down by China’s reduced buying of raw materials and lower prices of key commodities such as oil and copper
Trade between 
China and Africa
 fell by 10.6 per cent in the first 11 months from a year ago amid the pandemic, but analysts expect a rebound next year as key commodities like oil and copper recover.

Chinese customs data released on Monday showed two-way trade amounted to US$167.7 billion from January to November, driven down by lower commodity prices and a coronavirus-fuelled economic slump, according to analysts.

China’s exports to Africa edged up by 0.6 per cent to US$101.47 billion in the period from a year earlier. But China’s imports from Africa plunged 23.6 per cent to US$66.3 billion.

China’s two-way trade with South Africa, the continent’s most industrialised nation, also tumbled in the first 11 months, down 17 per cent to US$32.15 billion.

The numbers to November suggest China-Africa trade in 2020 will be well off last year’s level, which the Chinese commerce ministry said was US$208 billion.

Analysts attributed the falling trade figures to reduced imports of raw materials from the continent and a pandemic-induced slump in key commodities such as oil and copper. China is the biggest buyer of oil and metals such as cobalt and copper from Africa but its imports were reduced amid an economic slowdown, factory and port closures and restrictions on movement to curb the spread of the coronavirus.

Charles Robertson, global chief economist at Renaissance Capital, an emerging and frontier markets investment bank, said the drop in Chinese imports from Africa was almost entirely due to falling commodity prices.

But he said “some commodity prices are recovering well now so import growth should return in 2021”.

Virag Forizs, an emerging markets economist at London-based consultancy Capital Economics, said she would not separate the drop in commodity prices and subdued economic activity due to the pandemic.

She said that since exports from sub-Saharan Africa to China were primarily raw materials, the price slump for several key commodities, most notably oil, likely played a big role in the significant fall in African exports to China.

Countries such as Angola, Nigeria and the Republic of Congo were badly hit by the coronavirus-driven oil rout, which saw Brent crude prices in April fall to their lowest level since the Gulf war in 1991 and US oil futures fall into negative territory for the first time in history. Brent crude has since recovered to more than US$48 per barrel, giving hope of a recovery in oil-dependent nations like Angola and the Republic of Congo, which have been struggling to repay loans due to reduced revenues.

Prices of copper and cobalt, the main raw materials for car batteries and other electronics, were also hit amid subdued global demand. Copper, which sank to a low of US$4,630 a metric tonne in March, has bounced back and is now at a seven-year high of US$7,760.

Forizs said weak domestic demand in sub-Saharan African economies had also weighed on imports from China.

African exports were expected to rebound next year amid an improved global economic outlook on the back of 
Covid-19 vaccines
, but she said “the recovery in imports may take longer as a slower roll-out of vaccines in Africa weighs on demand for foreign goods”.

Mark Bohlund, a senior credit research analyst at REDD Intelligence in London, agreed that the trade data had been driven down by the fall in commodity prices, especially oil, caused by lower demand amid the pandemic.

“I know Angola redirected some shipments from China to other destinations to increase its oil revenue around June … they still sell oil to the smaller private ‘teapot’ refineries,” Bohlund said, referring to small independent refiners.

He said trade should recover in tandem with an oil price recovery.

Source: South China Morning Post