China’s imports of major industrial resources rose to record levels in January, in a sign that the country’s mild economic growth slowdown hasn’t blunted its appetite for raw inputs – or its love of bargain purchases.
Imports of crude oil, iron ore and copper posted all-time-high monthly volumes for the first month of the year, according to a slate of preliminary customs data released Wednesday. The purchases correspond to a period of low global prices among many industrial commodities toward the end of last year. China’s economy has continued to grow, powering higher levels of imports even though growth is slower.
Shipments of crude reached 28.16 million metric tons in January, equivalent to 6.66 million barrels a day. That is up 12% from a year ago and 5% from last month, which was also when the last record was posted.
The Lunar New Year, a time when China experiences the world’s largest annual human migration, is a prime suspect behind the surge in demand. Analysts say Chinese refiners process more crude around the holiday, which fell in late January and early February this year, to meet increased demand for transportation during winter and on expectation of a busy driving season over the period.
But the unusually large magnitude led at least one analyst to suspect an opportunistic stockpile purchase. “It’s not so easy for refineries to absorb such a sudden large influx of imports, so it’s more likely that the crude purchase went straight from ships into storage,” said Li Li, research director at consulting firm ICIS C1 Energy. Ms. Li said a commercial buyer in the city of Tianjin may have been behind the imports, rather than state strategic buyers.
It isn’t clear yet if such stockpiling may weigh on future demand. In some cases, high stockpiles coinciding with a broad macroeconomic slowdown have taken a toll on import volumes in subsequent months.
The motivation for opportunistic stockpiling: Brent oil prices touched $103 a barrel in November, the lowest level since July, Ms. Li said.
Fresh from posting a full-year record import volume for 2013, China also posted a record 86.84 million tons for January, a 33% rise from a year earlier and an 12% increase from the previous record set in November, customs data showed. Iron ore is used to make steel.
Iron ore prices in November and December languished at relatively low levels, down around 14% from the highest point of the year in February. Chinese inventories at ports picked up, signs that buyers were adding to stockpiles at ports and that large state-owned mills bought up pellets – a cleaner-burning type of iron-ore product – to meet Beijing’s tougher environmental standards for steelmaking.
The rush to meet Chinese demand has created more global supply, such as new iron-ore mines in Australia, which is weighing on prices. Some industry figures — includingNev Power, chief executive of Australia’s Fortescue Metals Group Ltd. — say commodity demand from the world’s second-largest economy won’t be sated for years to come.
Higher ore imports are coming despite lower levels of steelmaking, signs that the purchases are likely driven by opportunistic traders rather than actual demand from mills. “Iron ore prices came under pressure from December as new measures to control pollution in China’s northern industrial provinces led to a reduction in steelmaking activity,” said analyst Oscar Tarneberg of The Steel Index, a data provider.
Copper imports also rose to a record last month, up 53% from a year earlier to 536,000 tons – the highest since December 2011. Buyers took advantage of cheaper processing costs and were spurred by a lack of available copper scrap, a substitute import. “Tight scrap availability globally because of low levels of industrial production and lower prices helped to boost [copper] consumption in China,” Barclays Research said in a note.
via:http://blogs.wsj.com/economics/2014/02/11/china-resource-imports-hit-new-highs/?mod=WSJBlog&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Feconomics%2Ffeed+%28WSJ.com%3A+Real+Time+Economics+Blog%29
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