China and the stockpiling of commodities: strategy or growth?

China is the world’s largest consumer of commodities, consuming 40% of the world’s total and, consequently, it is a key player in the global demand for these products. The country is rich in some resources, mostly minerals, such as coal and some of the so-called critical minerals,1 but it lacks others, such as copper and nickel. Moreover, China is home to one fifth of the world’s population, but arable land on its territory accounts for less than 10%
of the world’s total and its hydrographic resources are limited. These circumstances mean that many of the commodities that China consumes are imported, especially by sea, in most cases crossing geographical choke points such as the Malacca Strait.

As a reference to understand this dependence on the outside world for its consumption of commodities, it is estimated that China imports 70% of the oil it consumes and 40% of its natural gas,2 as well as 80% of its demand for copper, 65% for aluminium and up to 94% in the case of nickel. This percentage is around 100% in the case of agricultural products derived from water-intensive crops.3

Despite playing a leading role in the commodity market, its lack of capacity to meet its own demand and its dependence on imports from other countries is a major source of risk for China.

In the 1980s, the Chinese authorities, aware of this source of risk, began to develop a long-term strategy that would allow them to safeguard the country’s national security and stabilise domestic markets in the event of any disruption in the global commodity market. Through the control of mines,4 of the trade in commodities,5
of the investment and financing of foreign production companies and through the signing of long-term contracts with energy and mineral suppliers, the Chinese government has been able to supply its productive structure. Simultaneously, since 2008 it has promoted the growth of a huge fund of strategic reserves of natural resources. These reserves act as a buffer in times of supply interruptions or price volatility, and the Chinese government can strategically release or store these products to influence dynamics in the domestic market and avoid extreme price fluctuations.

The precise volume of reserves in the fund is unknown, as is the rate at which the government expects to gather commodities. Nevertheless, by monitoring China’s imports of these products, we can see how there have been significant increases in recent years, largely driven by events affecting its economy. In 2018, during his first term, Trump imposed tariffs on Chinese exports worth 60 billion dollars a year, prompting China to respond with tariffs on US soybeans. In 2020, the COVID-19 pandemic disrupted supply chains and raised the cost of commodities. Then, in 2022, the war in Ukraine drove up prices even more and showed the US’ willingness to make use of embargoes.

In 2023, the value of China’s commodity imports reached an all-time high of 810 billion dollars (16% higher than the previous year), of which around 45% corresponded to purchases of crude oil and derivatives and just over 30% to industrial metals. In addition, the data for 2024 indicate that between January and November the value of imports of the main commodities continued to grow and was 1.5% higher than in the same period last year.

Another indicator that can shed some light on China’s strategy of stockpiling commodities is the level of accumulated stocks. Information on China’s emergency stocks is strictly guarded by the government, making it difficult to estimate their levels. However, in the last five-year plan (2021-2025), the government showed its willingness to intensify the expansion of the country’s storage capacity as a way to increase import flows of energy and food. In the case of energy, it is estimated that the current storage capacity of crude oil is around 2 billion barrels, equivalent to almost six months of consumption, while that of the US is around 2.4 billion. For natural gas, the storage capacity could reach 85 billion cubic metres by 2030 (representing 16% of annual demand), compared to 130 billion cubic metres in the US (enough to supply 15% of the country’s demand). Also, in this regard, the Shanghai Futures Exchange tracks inventory levels of a number of metals and energy materials6 deposited in stores throughout the country. Between January and November 2024, all the indicators showed an increase in excess of 100% (with the exception of zinc, which registered an increase of 84%), having reached the maximum levels of accumulation between June and July, depending on the product.

Certainly, the observed increase in commodity stocks could be related to the weakness of economic activity in the Chinese economy, which leads to lower consumption of these products. However, if we consider the international context that is beginning to emerge in 2025, we can find various arguments that would justify the intensification of China’s commodity stockpiling activities. Firstly, despite the government’s recent economic policies, China could be preparing for a more stable growth cycle in the medium term, and it would like to disengage from Western supplies. Secondly, China could be expanding its storage infrastructure7 and bringing its commodity purchases forward in anticipation of Trump’s announced tariffs beginning in February. Another explanation could be that China is preparing for new geopolitical threats. In this regard, the influence of the US over the Strait of Malacca is a crucial aspect for China, since two thirds of the goods that pass through its waters go to China. Finally, the US Security Commission points to the possibility that the accumulation of metals and minerals could be related to a potential Chinese incursion into Taiwan.8 Some financial analysts relate this argument to China’s increased purchases of gold (gold stocks appear to have increased by more than 400% between April and December 2024) and to the reduction of its holdings of US debt (–6.9% between January and November) as a possible means of protecting itself against any Western sanctions on the country’s dollar accounts.

Given that these factors will remain present in 2025, we can expect the Chinese government to maintain the pace at which it is accumulating commodity reserves, or even to increase it in the face of stress in some of them. If this were to happen, we believe it would most likely lead to greater upward pressure on commodity prices, as a result of the increased demand from China and the increased allocation of risk premiums in the financial markets.