China notches record imports of key commodities
Fresh credit lines in the first month of the year combined with restocking ahead of the long Chinese New Year holiday drove up Chinese imports of oil and some key commodities to record highs in January.
Imports of crude oil, copper and iron ore are often watched for insight into the strength of the Chinese economy, but the western and Chinese New Year holidays often distort data in the month in which they fall.
January’s records do not necessarily portend strong imports for the coming months, although iron ore is expected to continue to flow in.
Imports of unwrought copper hit a record high of 536,000 tonnes, Chinese customs data showed on Wednesday, up 21 pct from the month before as buyers who had used up their credit lines at the end of 2013 restocked.
In addition to manufacturers of copper products, copper importers include real estate developers and other credit-starved industries that open lines of credit to import copper then sell the metal in domestic markets to raise cash.
Crude oil imports hit a fresh record of 6.65m barrels a day, reflecting the start-up of new refineries in the provinces of Fujian and Sichuan. A new strategic petroleum reserve due to begin operations may also have boosted imports, said Barclay’s analyst Sijin Cheng.
Iron ore imports reached a record 86.8m tonnes, a 22 per cent rise on the previous month, as producers in Australia and Brazil pushed more of the steel-making commodity into China.
This helped to push down iron prices as inventories built at Chinese ports. According to Shanghai-based consultancy Steelhome, iron ore stocks at major Chinese ports now stand at a near-record 97.25m tonnes.
Benchmark iron ore prices as assessed by the Steel Index have fallen from $135 a tonne at the start of the year to $120 earlier this week.
Citi analyst Ivan Szpakowsk said exports from Australia and Brazil were likely to fall in February because of adverse weather conditions that had hit production there.
Unexpectedly strong Chinese steel production – which peaked at 2.2m tonnes a day in May – helped boost iron ore imports over the past year. Steel output has since dropped to about 2m tonnes a day as of mid-January and seaborne iron ore prices have also softened to six-month lows.
But high-grade imports are likely to continue to see strong demand from Chinese mills, displacing low-grade and relatively expensive domestic ore.