China oil consumption
China, the world’s second-largest oil consumer, is currently importing only half of its requirement. Since January 2009, China’s oil imports have more than doubled, at a 16% compounded annual growth rate. As of December 2014, crude imports had reached 7.1 million barrels per day.
Looking ahead, China’s strategic petroleum reserve, or SPR, is likely to grow at an accelerated rate. China is close to accumulating 100 million barrels as part of the second phase of its SPR. Likely, it will take more shipments via VLCCs (very large crude carriers) to meet both the greater SPR capacity and demand from new refineries that we’ll learn about in Part 11 of this series.
These developments should positively impact the iShares China Large-Cap ETF (FXI) and shipping companies including Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Scorpio Tankers (STNG), and Capital Product Partners (CPLP).
China’s imports to exceed rest of the world
China’s current projections indicate crude oil imports will exceed imports to the US by 2015. As the country continues to urbanize, industrialize, and motorize its economy, it will require almost 14 million barrels per day by 2035.
On a per capita basis, US oil usage is 7.5 times that of China. European usage is 3.5 times that of China and global usage, 1.6 times. If China grows to global per capita consumption levels, it would require an additional 300 VLCCs worth of shipments, assuming all crude would be imported by sea. To meet this need, the existing global fleet would need to expand by about 50%.
What’s more, historical patterns suggest that rising growth of global GDP (gross domestic product), VLCC time-charter rates have also improved. The International Monetary fund projects higher global GDP growth for 2015 than in 2014.