To what extent has China’s economy sprung back life? Are official statistics painting a rosier picture than reality?
And how does China fit into the rest of the world?
Can China supply enough oxygen to resuscitate the global economy? Or will the transmission work in reverse? Will weakness in the global economy ultimately hobble China?
For answers, we’re leveraging satellite radar imagery to monitor critical sectors of China’s economy, including crude oil inventories, freight rail, and automotive manufacturing.
This is an update to an earlier blog from mid-April after China had apparently turned a corner, driving down the number of new COVID-19 cases.
At that time, China’s crude oil inventories had stopped builds a few weeks prior, a likely sign of renewed refinery activity (Figure 1).
Indeed, China’s refineries processed 13.1 million barrels per day (bpd) in April, up from 11.78 million bpd in March, according to National Bureau of Statistics data.
Crude inventories kept falling until May 14th, when they turned higher but remained below the March 26th peak (Figure 2).
Our coverage of China includes 41 locations, with a total capacity of more than 1.3 billion barrels. Ursa uses synthetic aperture radar (SAR) to measure global crude inventories, including in China, on a weekly basis.
China’s refinery activity is believed to still be robust.
S&P Global Platts pegged the utilization rate for independent refiners at nearly 80% in May, a record high. That estimate was based on data from JLC, an information provider in China.
Figure 3 shows crude inventories in Shandong Province, home to most of China’s independent refineries. A pickup in refinery activity caused crude inventories to turn lower after March 19th.
Even though refinery activity has been strong, imports have caused inventories to turn higher.
China’s crude oil imports averaged 11.34 million barrels per day (bpd) in May, a record high according to customs data.
The volume of crude arriving on China’s shores has been too much to process. The surplus is going into storage.
One motivation behind the splurge was price. When oil prices crashed, China began snapping up cargoes, causing imports to rebound in April.
Such deals are no longer possible, considering the rebound in oil prices, which is something that China’s additional demand contributed to.
After closing just below $20 per barrel in late April, ICE Brent topped $40/b this month for the first time since early March, when prices were headed lower.
Assuming China’s imports ease, the main factor influencing crude inventories will be refinery activity. So what does the future hold?
In April, there was a sense that refineries were returning to action in response to a recovery in fuel demand.
Authorities lifted travel restrictions and some business activity resumed, helping to offset a collapse in consumption in other countries.
The current situation is harder to generalize. Economic data is mixed.
China’s official manufacturing Purchasing Managers’ Index (PMI) showed an expansion in May after three straight months of increases. A private survey released by Caixin/Markit also showed an expansion in May.
However, recent trade data was cause for concern. In May, China’s exports and imports in US dollar terms were lower compared with a year ago, underscoring sluggish foreign and domestic demand abroad.
We’re using satellite radar imagery to get a better understanding of China’s economic performance amid the coronavirus pandemic.
The examples cited here -- an automobile factory and freight rail station -- both utilize the same technique.
We’re using satellite imagery to create a SAR activity index. A score above 1 indicates more activity than average during the time period examined. A score below indicates less activity than average.
For more information, check out this “How We Use SAR” story map.
We examined a VW plant in Tianjin, China. Figure 5 shows the lot adjacent to the factory where finished vehicles are temporarily stored.
We have observed a steady increase in the fullness of this lot since April after a downturn in February - March (Figure 6).
This suggests an increase in production, as workers returned to the VW factory.
We’ve since scaled our monitoring of automobile facilities to other plants around the world. Click here to view our interactive dashboard.
Another industry we’re examining is freight rail activity, the fortunes of which are closely tied to the broader economy.
We began looking at the North Wuhan station, the rail freight hub in Hubei Province (Figure 7).
Our SAR activity index shows a downturn after the lockdown in Wuhan began. But since restrictions were lifted, the index score has risen, with the latest readings well above the lockdown levels (Figure 8).
We’ve applied a similar technique to US freight rail hubs, including Chicago, which is the country’s largest.
You can view this blog and other material on our COVID-19 Dashboard, which is available to the public.
Ursa is continuously monitoring vital locations around the world using satellite imagery to provide a deeper understanding of the impacts of COVID-19.
If there’s somewhere you’d like us to take a look, please let us know.