Iran-China Trade: Tonnage Up, Value Down

China is Iran’s biggest trading partner, yet while the trade marked an all-time high in terms of volume, trade value has taken a beating amid the global bear market.

“In 2016, 66.32 million tons of commodities, including oil and non-oil goods, worth $31.24 billion were traded between the two countries,” Iran’s Ambassador to China Ali Asghar Khaji was quoted as saying by IRNA.

“The volume of the shipments recorded a 410,000-ton rise, while in terms of value, trade witnessed a 7.7% decline compared to 2015.”

Khaji noted that in 2016, the global economy was influenced by a drop in the prices of oil and other non-oil commodities, including petrochemicals, iron ore, raw minerals and industrial products.

The global drop in commodity prices has become a challenge for many emerging economies in the past few years,, as it will perhaps sustain in the next couple of years, according to World Bank estimates.

The global prices of major food commodities declined for the fifth year in a row in 2016, according to new data from the UN’s Food Agriculture Organization. 

For 2016, FAO’s food price index averaged 161.6 points, down 1.5% from 2015, representing the fifth consecutive annual decline. While prices of sugar and vegetable oils rose significantly last year, falling prices in cereal, meat and dairy markets kept the index below its 2015 average.

Iran is a major food importer, with soybeans, rice, grains and sugar accounting for the majority of its annual inbound shipments. 

As for exports, pistachios and agricultural products hold a considerable share among Iranian products shipping overseas.

On the other hand, oil, Iran’s top export, has recorded an overall decline in recent years amid global oversupply. Per-barrel price of West Texas Intermediate crude oil sank below $30 at the start of 2016, skidding by the middle of February that year to touch $25–the lowest in the past few years.

Although crude prices have recently seen a slight increase amid a production cap agreement among major producers, they are still relatively low compared to 2014 and the years before. 

The Organization of Petroleum Exporting Countries agreed to reduce output by 1.2 million barrels per day from January 1, 2016, its first such deal since 2008. 

Russia and other non-OPEC producers plan to cut about half as much.

  Iran’s Biggest Oil Importer

Khaji referred to China as Iran’s biggest crude importer in 2016, adding that oil accounted for 63.1% of Iran’s exports to the East Asian country during the period.

He said China imported 31.29 million tons of crude oil worth $9.35 billion from Iran last year, indicating a 17.6% rise in quantity, but a13.2% fall in value compared to the previous year.

This comes as in 2014, despite lower exports of 27.4 million tons, Iran earned $20.7 billion from supplying crude to China. 

“The average price of each barrel of oil stood at $103 in 2014. In 2015, it fell below $55 and in 2016 it reached $40.6,” Khaji explained.

“This has also been the case for the petrochemicals. Although we witnessed a rise of 320,000 tons in petrochemical exports to China last year due to the downtrend in global crude prices, our revenue in the field [petrochemical exports to China] was $220 million down compared to 2015.”

Last year, more than 5 million tons of petrochemicals worth $3.13 billion were exported from Iran to China, accounting for 21.15% of all Iranian exports to China, according to the envoy.

The falling prices, however, did not have a significant effect on exports of minerals.

Iran exported 14.4 million tons of concentrates and iron ore, worth $809 million to China, which indicates a 9.5% rise in tonnage and a 16.7% increase in value. 

“This is while average per-ton price of iron ore went below $51.2 in 2016 from $55.4 in 2015,” Khaji said.

Non-oil exports, he added, held a 36.8% share of Iran’s total exports to China in 2016. Iran exported $23.8 million tons of non-oil goods valued at $5.46 billion to China in the period. Exports rose 11.52% in terms of volume and 3.79% in value over the preceding year.

This is while 11.1 million tons of goods worth $16.4 billion were imported from China in 2016, indicating a 7% decline in value despite a 20.7% rise in volume. 

According to the latest data provided by Islamic Republic of Iran Customs Administration, exports are rising while imports are going down.

Iran exported 25 million tons of non-oil goods worth $5.7 billion to China during the 10 months of the current Iranian year (March 20, 2016-January 19, 2017), registering a 32% hike in volume and a 7% increase in value.

During the period, 3.3 million tons of goods worth $7.5 billion were imported from China, which shows declines of 10% and %2.4 in volume and value respectively.