China-Iran Trade Report (December 2020)
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A Year That Could Have Been Worse
New data released by the General Administration of Customs of the People’s Republic of China (GACC) shows a relatively strong end to 2020 for China-Iran trade. Exports rose to USD 657 million from USD 609 million in the previous month. Imports bounced back, rising from USD 498 million to USD 733 million in December, meaning that China ran a trade deficit with Iran for just the second month in 2020, with China’s imports exceeding its exports by USD 78 million. Iran will be encouraged by decreasing trend in China’s trade surplus, which had been spurred in part by the supply-chain shocks related to COVID-19 and the volatility in the Iranian currency in the first nine-months of the year.
China’s declared oil imports were USD 180 million, the second highest monthly total in 2020. Add to this a considerably increase in declared imports from Malaysia and it is clear that Iran is exporting more oil to China, a fact that suggests the actual trade deficit China is running is greater than what the customs data suggests. It is possible that the increase in oil purchases, both directly from Iran and via Malaysia, is a reaction to the election of Joe Biden.
Overall, China-Iran trade ends 2020 with a stable outlook. The unexpected shock of the pandemic has passed and it appears that the impact of secondary sanctions is no greater than in 2019. Bilateral trade should be expected to return to 2019 levels in the coming months, so long as Iran’s economic recovery continues.
Trends in Bilateral Trade
Trends in Imports
Imports
Exports
China-Iran Trade Report (November 2020)
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For Iran, Newfound Stability in China Trade Won’t Suffice
New data released by the General Administration of Customs of the People’s Republic of China (GACC) shows that Chinese exports to Iran were stable for the third straight month, falling from USD 626 million in October to USD 609 million in November. Imports fell more sharply, from USD 603 million in October to USD 498 million in December. The decline in imports is almost entirely attributable to China’s non-oil purchases. Declared oil imports (HS chapter 27) totaled USD 79 million in November, down just USD 5 million from the prior month. Overall, China generated a small trade surplus of around USD 110 million in November.
The November data, which lacked any signs of growth, may reflect the slowdown in manufacturing activity in Iran that began as a third wave of COVID-19 infections hit the country in October, culminating in a national lockdown late in the month. But even if the numbers may be underwhelming, the stability in bilateral trade, mirrored also in newfound stability in Iran’s foreign exchange markets, offers a base from which to work to expand trade links should a Biden administration lift U.S. secondary sanctions on Iran. No immediate response to Biden’s election can be seen in the November customs data, but it may be possible that Chinese enterprises, particularly those that have cut-back on Iran trade, will become more amenable Iran-related transactions as we approach Biden’s inauguration. A realistic goal for China-Iran trade will be to raise the value of Chinese exports to Iran back to a consistent level around USD 1 billions. Meanwhile, Iran will wish to see Chinese imports of Iranian oil—particularly direct imports reflected in customs data—approach USD 500 million per month.
Next month’s report will look at year-on-year changes in trade between 2018, 2019, and 2020 in order to provide further analysis on what Chinese and Iranian stakeholders can reasonably target as they seek to rebuild trade in the wake of sanctions and the pandemic.
Trends in Bilateral Trade
Trends in Imports
Imports
Exports
China-Iran Trade Report (October 2020)
China’s Non-Oil Imports from Iran Return to Pre-Pandemic Level
After running a small trade deficit with Iran in September, China’s trade with Iran again ran a surplus in October, albeit a small one. New data released by the General Administration of Customs of the People’s Republic of China (GACC) shows that Chinese exports to Iran were basically unchanged between September and October, falling slightly from USD 666 million to USD 626 million. Meanwhile, a lower level of oil purchases saw imports fall from USD 709 million in September to USD 603 million in October. Taken together, China generated a surplus of USD 23 million in its trade with Iran following September’s USD 43 million deficit.
Data from TankerTrackers.com suggests that Iran exported around 1.1 million barrels per day of oil products in September, the vast majority of which was destined for Chinese buyers. That the October total for oil imports is USD 84 million, down from the USD 225 million declared in September is therefore surprising. But the disparity between observed exports and the customs totals can be explained by the fact that most Iranian oil sold to China is arriving via ship-to-ship transfers and blending with crude from other suppliers. As has been noted before in these reports, these circumstances mean that Iran’s earnings are greater than what the GACC data suggests.
While declared oil imports were down from their September totals, Chinese imports of non-oil goods from Iran continued to grow, reaching the highest level since March 2020. The March 2020 data reflects purchases of goods dispatched in February, prior to the acceleration of the COVID-19 crisis in Iran. Chinese imports of plastic products (HS Chapter 39) showed further growth rising to USD 297 million, up from USD 250 in the previous month. Imports of Iranian iron and steel products (HS Chapter 72) fell from their 2020 high of USD 103 million to USD 30 million. This fall was compensated in part by a rise in the imports of organic chemicals from USD 34 million to USD 84 million. In this regard, the non-oil imports figure may reflect the returning strength of the Iranian manufacturing sector, which has returned to growth in the last few months. In order to analyze trends while accounting for month-to-month volatility in totals for certain imports, a new chart has been introduced to this report, presenting the three-month rolling average for Chinese imports of Iranian oil and non-oil goods.
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Trends in Bilateral Trade
Trends in Imports
Imports
Exports
China-Iran Trade Report (September 2020)
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China’s Runs Trade Deficit With Iran in September
New data released by the General Administration of Customs of the People’s Republic of China (GACC) indicate that China ran a small trade deficit with Iran for the first time since December 2019. Chinese exports to Iran fell from a total of over USD 826 million in August to USD 666 million in September, while imports rose to their highest monthly total this year, registering at USD 709 million.
The rise in declared imports in September includes USD 225 million of oil imports, the highest total since November 2019 and a sharp uptick from the effective total of zero declared oil imports in August. The rise in China’s oil imports had been predicted in August following reports of increased tanker traffic leaving Iran. Notably, there was only a small decrease in declared oil imports from Malaysia. This suggests that rather than simply shift intermediated purchases to direct purchases, China bought significantly more Iranian oil in September.
However, China ran a trade deficit with Iran not only because of the resumed oil purchases, but also because of significant growth in non-oil imports in two key product categories. Chinese imports of plastic products (HS Chapter 39) hit just over USD 250 million, up from USD 96 million in August. Imports of iron and steel products (HS Chapter 72) also reached a new high for 2020 at USD 103 million, up from USD 86 million in the prior month. For the Iranian economy, these are encouraging results following August’s dismal import total of just USD 322 million.
With Iran’s currency continuing to show significant weakness, September’s trade results will offer some hope for the outlook of China-Iran trade, even if Chinese exports to Iran were down 20 percent on August’s total. Continue to run a trade surplus with China, would enable Iran to ease the foreign exchange challenges facing importers and create space for Chinese exports to rise in a more sustainable fashion.
Iranian foreign minister Javad Zarif traveled to China for talks with his counterpart Wang Yi in early October. It may be that both Iran and China expect stabilization in bilateral trade in the final quarter of the year.
Trends in Bilateral Trade
Trends in Oil Imports
Imports
Exports
China-Iran Trade Report (August 2020)
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Another Strong Month for Chinese Exports to Iran, But Iran’s Trade Deficit Expands
New data released by the General Administration of Customs of the People’s Republic of China (GACC) indicate that China exported over USD 800 million in goods to Iran for the second straight month, corresponding to increased confidence among Iranian manufacturers regarding the availability of raw materials and intermediate inputs.
However, Chinese imports from Iran totaled just USD 322 million, the lowest figure over the last 24 months (and likely for many years). After July’s rebound from the June total, declared oil imports fell back to “zero” in August, totaling just USD 387,000. Nearly one-fourth of Chinese imports were comprised of Iranian iron and steel products, which posted relatively strong figures. China also continued purchases of Iranian plastics products, which constituted another one-fourth of the overall import total.
The low level of Chinese imports mean that Iran’s trade deficit—at least as calculated in the Chinese customs data—exceeded USD 500 million in August. Of course, the true deficit is likely lower than the customs data suggests, as the value of Chinese imports of Iranian oil via Malaysia is not counted. Nonetheless, Iran appears to be running a widening trade deficit with a partner with which it once ran a considerable surplus. This will put significant strain on the country’s foreign exchange market.
What Iran needs in order to rein in the deficit is a recovery in its direct oil sales to China. A recent report by Reuters, featuring new data from TankerTrackers.com suggests such a recovery could be forthcoming. TankerTrackers.com has seen an uptick in Iran’s oil exports, observing at least 1.5 million bpd in exports in September. While a significant portion of these exports can be expected to reach China via Malaysia, as has been the norm since May 2019, it is possible that the increase in exports will see Iran’s direct sales recover following the China’s declaration of “zero” purchases in June and in August.
Such an uptick may be the first fruit for Iran’s renewed efforts to upgrade its relations with China and to secure stronger Chinese commitments on trade and investment. Any sales related to oil tankers tracked this month will appear in October’s customs data.
Trends in Bilateral Trade
Trends in Oil Imports
Imports
Exports
China-Iran Trade Report (July 2020)
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Chinese Exports to Iran Reach Highest Level Since December 2019
New data released by the General Administration of Customs of the People’s Republic of China (GACC) indicate that China exported over USD 876 million worth of goods to Iran in July, the highest level of monthly exports since December 2019. The monthly export total is slightly higher than the average monthly exports observed in 2019 (USD 816 million) and points to recovering demand for Chinese raw materials, parts, and machinery among Iranian manufacturing firms.
July exports in HS Section 16 (which includes machinery and mechanical appliances) were up 20 percent from their June totals, reaching USD 305 million. Exports in HS Section 17 (which covers vehicles) rose 160 percent from their June total to reach USD 95 million, the highest monthly total this year.
Similar growth was seen in key categories of intermediate goods, Exports in HS Section 6 (which includes plastics and related articles) rose 55 percent from the June total to reach USD 80 million. Exports in HS Section 15 (which includes articles of base metals), rose 46 percent to USD 83 million.
This export growth, if sustained, will no doubt ease the concerns of Iranian manufacturers over the availability and affordability of inputs and equipment. But the recovery in Chinese exports to Iran was not matched by a recovery in Chinese imports. Notably, Chinese imports in HS Section 15 (which covers articles of base metals) hit a new low for 2020 at just USD 24 million, down USD 87 million from June’s total.
Overall, imports were USD 403 million in July, down slightly from the USD 415 million total in June. By comparison, Chinese monthly imports from Iran averaged USD 1.1 billion in 2019. The monthly trade deficit is at its widest point in the last two years (and likely much longer), a fact that may exacerbate the foreign exchange and payment related challenges facing China-Iran trade.
However, Iran did see a bump in China’s direct imports of Iranian oil, up from last month’s “effective zero” to USD 134 million. Meanwhile, imports of Malaysia oil also grew, much of which is re-exported Iranian crude. Taken together, Iran is likely running a smaller deficit with China than is apparent, although it is not clear how the intermediated oil sales contribute to the availability of foreign exchange.
Trends in Bilateral Trade
Trends in Oil Imports
Imports
Exports
China-Iran Trade Report (June 2020)
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Official Data Shows Chinese Imports of Iranian Oil Hitting “Zero”
New data released by the General Administration of Customs of the People’s Republic of China (GACC) indicates that China imported just $212,000 of crude oil from Iran in June, an effective “zeroing” of declared imports.
There are a few possible explanations for the remarkable low figure. It may be an error, although this is unlikely given the month-on-month fall in China’s declared imports is consistent with the long-term trend. It is also unlikely because the same figure can be seen in both the English-language and Chinese-language monthly reports published by GACC.
Alternatively, it could reflect a situation where essentially all of Iran’s direct deliveries of oil were placed into bonded storage, and therefore not in-fact imported by Chinese refiners.
However, the most likely explanation is that China’s oil imports from Iran are now fully intermediated, with Malaysia serving as the re-export hub. China’s declared imports of crude oil from Malaysia exceeded $1 billion for the first time since February, marking the third straight month that imports from Malaysia have risen while imports from Iran have fallen. Data from TankerTrackers.com places Iranian oil exports in May at 753,862 bpd—down from 900,000 bpd in April—these exports would have arrived in Chinese ports in the month of June.
Nonetheless, the fact that China has effectively declared “zero” imports of Iranian oil in June is symbolically important, especially as the two countries seek to restart negotiations on an upgraded economic and political partnership.
Looking to non-oil trade, Chinese non-oil imports from Iran rose 27 percent from their May totals to reach USD 415 million, a reflection of the recovery in manufacturing output in Iran as the country has emerged from the COVID-19 lockdown.
Meanwhile, Chinese exports to Iran totaled just USD 564 million, the lowest level since February 2019. June exports of goods in HS Section 16 (which includes machinery and mechanical appliances) were down just 1 percent, stabilizing after the 15 percent fall in the monthly export value between April and May. However, exports fell 60 percent month-to-month in HS Section 17 (which includes vehicles and transport equipment) and 31 percent in HS Section 6 (which includes plastics and related articles). These low export totals correspond to growing concerns among Iranian manufacturers over the availability and affordability of manufacturing inputs and equipment.
Trends in Bilateral Trade
Trends in Oil Imports
Imports
Exports
China-Iran Trade Report (May 2020)
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Iran Trade Deficit With China Widens as Oil Imports Plummet
New data released by the General Administration of Customs of the People’s Republic of China (GACC) points to a widening reported trade deficit. Non-oil imports fell to USD 325 million in May, down from USD 405 million in April.
Disruptions in Iranian oil and non-oil exports have recently contributed to Iran’s currency, the rial, falling to a historic low against the dollar. The dollar now worth around 200,000 rials. The value of the rial can be considered a lagging indicator for the trade disruptions that shook the country in April and which are now reflected in the new GACC customs data. The trade with China can recover in the coming months, but it remains an open question as to whether Chinese buyers will have reoriented their supply chains away from Iran over the last few months.
More positively for Iranian enterprises, Chinese exports to Iran continue to indicate a post lockdown recovery. Exports of goods in HS Section 16 (includes machinery and mechanical appliances) were down 15 percent from the April total. But the May total of USD 278 million remains considerably higher than the March level of USD 208 million which concurred with the peak of Iran’s coronavirus crisis.
The challenge for Iran is sustaining imports from China at a time when its own exports to the country continue to underperform. Exports continued to show weakness in May, reflecting the reduced cargoes leaving Iranian ports in April during the nationwide lockdown.
Compared to April totals, import values in May fell a staggering 57 percent in HS Section 5 (includes crude oil), 25 percent in Section 6 (includes chemical products), and 13 percent in HS Section 7 (includes plastics)—declines added to poor performance between March and April. However, Chinese imports from HS Section 15 (includes iron and steel) recovered somewhat, rising 18 percent to total USD 32 million.
The declared value of China’s imports of Iranian oil (HS Chapter 27) fell below last month’s historic lows and registered at just USD 44 million. However, imports from Malaysia rose by USD 200 million, indicating that Iranian oil continues to be reexported via Malaysia. Data from TankerTrackers.com places Iranian oil exports in April at 900,000 bpd—a healthy total given the pressure of U.S. secondary sanctions—these exports would have arrived in Chinese ports in the month of May.
Trends in Bilateral Trade
Trends in Oil Imports
Imports
Exports
China-Iran Trade Report (April 2020)
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COVID-19 Hits Chinese Imports from Iran
New data released by the General Administration of Customs of the People’s Republic of China (GACC) demonstrates the impact of COVID-19 on Chinese imports of Iranian manufactured goods. Non-oil imports fell to USD 405 million in April, down from USD 551 million in March—26 percent decline.
Compared to March totals, import values in April fell 9 percent in HS Section 5 (includes crude oil), 2 percent in Section 6 (includes chemical products), 22 percent in HS Section 7 (includes plastics) and a significant 69 percent in HS Section 15 (which includes iron and steel). The fall in import values of manufactured goods in these sections is likely attributable to disruptions in Iran’s industrial output related to the COVID-19 outbreak (see the Iran PMI Report for more details).
Data for Chinese exports to Iran suggest that a rebound in Iranian industrial activity is forthcoming. Exports of goods in HS Section 16 (includes machinery and mechanical appliances) rose from USD 208 million in March to USD 330 million, a 58 percent increase that marks a highpoint for exports in this category in 2020.
Based on the declared value of China’s imports of Iranian oil, trade in crude oil (HS Chapter 27) is at the lowest level in two decades, reflecting the collapse in global oil prices. Declared imports showed a small rise in April to USD 121 million from USD 115 million in February. Yet, Iran continues to export oil to China via Malaysia. The 12 month rolling trend presented below reflects how the value of declared imports of Iranian oil presented in GACC data continues to underestimate the total economic value of Iranian oil exports to China.
The “hidden” value of China’s import of Iranian oil via Malaysia likely means that Iran is still running a small trade surplus in its bilateral trade with the People’s Republic, even though April customs data points to a trade deficit of USD 270 million, the highest such deficit over the last 12 months.
