China bought half of Brazil’s oil exports as Iran war shut Hormuz, driving sales to record

Trade between Brazil and China reached a record US$143 billion in the first nine months of the year, driven by Brazilian oil sales that surged after the war on Iran disrupted Gulf supply, according to a report by the Brazil-China Business Council.

Brazilian exports to China rose 12 per cent to US$84.7 billion between January and September, while imports from China grew 9.9 per cent to US$58.6 billion, the council said in its quarterly analysis of government data. The resulting US$26.1 billion surplus equalled 42 per cent of Brazil’s trade surplus with the world.

Crude oil accounted for most of the gain, with sales to China jumping 49 per cent to a record US$21.8 billion as shipments rose 27 per cent by volume and prices climbed 16.8 per cent. China took half of all the crude Brazil exported, nearly seven times the share of India, the next-largest buyer.

Tensions in the Middle East and the risk of disruption to oil flows through the Strait of Hormuz “increased the search for more stable suppliers, favouring Brazil, an important exporter of the commodity”, the council said in the report.

Tehran effectively closed the strait after US and Israeli strikes on Iran began in late February, cutting off a route that carried more than half of China’s seaborne crude imports, according to ship-tracking firm Kpler.

Chinese buyers increased purchases from Brazil even as China’s total crude imports fell 32 per cent in the second quarter, according to Chinese customs data cited by the US Energy Information Administration. Brazil’s crude exports to all markets grew 28.7 per cent to US$43 billion, with sales to India up 165 per cent.

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Oil now makes up 25.8 per cent of Brazilian exports to China, up 6.3 percentage points from a year earlier and second only to soybeans at 35.4 per cent. The shift has made Rio de Janeiro the largest exporting state to China, the report showed, as it supplied 89 per cent of the crude sold to the Chinese market.

The nine-month figures also show the boom losing pace, since the council reported in July that exports to China had grown 22 per cent in the first half and that China had taken 54 per cent of Brazil’s crude.

Gulf oil exports excluding Iran recovered to more than 81 per cent of pre-war levels in September after a US-Iran agreement in June, according to Kpler and Vortexa, although Iranian attacks on tankers have intensified this month.

Beef was the biggest drag on Brazilian sales, falling 8.5 per cent to US$5.5 billion with volumes down 22 per cent, after Brazil filled its annual quota of 1.1 million tonnes under a Chinese safeguard.

Shipments above it have paid a 55 per cent surtax since the start of this month, and September sales to China came to just US$68.3 million, compared with US$1.05 billion a year earlier.

China fell to fifth place among buyers of Brazilian beef in September with 5.6 per cent of the total, the report showed, behind the United States at 21.5 per cent. Over the nine months, Brazilian exports to the United States fell 6.5 per cent, and the US took 9.6 per cent of Brazil’s sales abroad against 29.7 per cent for China.

Electrified cars led the growth in imports from China, with purchases of plug-in hybrids up 89 per cent to US$2.87 billion and battery electric cars up 341 per cent to about US$2.4 billion.

Together with conventional hybrids, they made up about a 10th of all Brazilian imports from China, and Chinese brands supplied 86 per cent of the electrified cars Brazil bought abroad.

Monthly imports of the three categories collapsed from US$1.87 billion in June to US$22 million in July, when Brazil raised the import duty on them to 35 per cent, before recovering to US$449 million in September.

The report also recorded the first results of Chinese market openings for Brazilian farm goods, with sorghum sales reaching US$170 million and China taking 95 per cent of Brazil’s exports of the grain.

Exports of spodumene, a lithium-bearing mineral, rose 339 per cent to US$172.3 million, with 97 per cent going to China.