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UPDATE 2-China's monthly commodity imports climb on favourable prices
December 8, 2014 / 9:38 AM / 3 years ago

UPDATE 2-China's monthly commodity imports climb on favourable prices

* Iron ore imports hit second lowest this year in November

* Copper imports up 5 percent m/m, down nearly 4 percent y/y

* Steep year-on-year drop in China’s coal, iron ore imports

* Iron ore arrivals to stay weak, new environment rules to hurt

By Fayen Wong

SHANGHAI, Dec 8 (Reuters) - China’s monthly imports of most major commodities rose in November on favourable prices and stockpiling, although a gloomy outlook for steel dragged iron ore arrivals down to their second lowest this year.

Year-on-year comparisons were, however, lacklustre with double-digit percentage drops in coal and iron ore imports and a near 4 percent decline in copper shipments, reflecting China’s waning appetite for commodities as its economic growth slows to the weakest since the global financial crisis.

“Demand for commodities has been hit hard by the slowdown in the property sector and this has exacerbated the supply glut that we’re seeing for many industries, especially for steel, iron ore and coal,” said Zhou Hao, an economist at ANZ Bank.

While monthly imports of crude, copper, coal and soybeans could climb further on favourable differentials between import and domestic prices, arrivals of the steelmaking ingredient iron ore would remain weak, industry sources said.

“New environmental rules that will come into force on Jan. 1, 2015 could slow steel production in China’s north-east region and exacerbate the seasonally slow winter demand,” Daniel Hynes, a commodities analyst at ANZ said.

Headline data showed China’s overall imports shrank unexpectedly in November while export growth slowed, fuelling concerns the world’s No.2 economy could be facing a sharper slowdown and adding pressure on policymakers to ramp up stimulus measures.

CRUDE OIL

China’s crude imports rose a stronger-than-expected 7.9 percent in November from a year earlier, but growth in fuel demand remained subdued in the world’s top energy consumer, suggesting the country may be boosting its reserves.

November crude imports at 25.41 million tonnes, or 6.18 million barrels per day (bpd), were up 9 percent on a daily basis from October, customs data showed.

But the rise in imports have come as implied oil demand dropped to 10 million bpd in October from September’s 10.3 million - suggesting crude is flowing into both strategic and commercial storages.

Indicating Chinese firms were taking advantage of an oil price slump to restock, PetroChina boosted its purchases in the Asian spot market in October, soaking up nearly 24 million barrels of crude.

COPPER, COAL, SOYBEANS

China’s monthly copper imports hit a 7-month high of 420,000 tonnes in November on arrivals of term shipments.

With Shanghai copper stocks falling and bonded warehouse inventory low, analysts expect imports to rise further on stockpiling. Low offshore interest rates will also keep financing activities elevated, they added.

Coal imports last month fell 26 percent from a year ago as users cut shipments after Beijing reinstated import tariffs, but it rose on month to 21.03 million tonnes on higher domestic spot prices.

Imports could rise further in December, trade sources said, as miners would want to keep local spot prices elevated amid negotiations with power plants for 2015 annual supply contracts.

Soybean arrivals jumped 47 percent on month to 6.03 million tonnes as low U.S. prices spurred purchases amid peak seasonal demand.

IRON ORE SLUMP

Chinese iron ore imports tumbled to 67.4 million tonnes as steel mills and traders in the world’s top consumer held back on restocking amid expectations of more price falls.

Spot iron ore prices have dropped 47 percent this year and hit a five-year low of $68 last month on slowing economic growth in China and surging output from Australia and Brazil, the world’s two biggest suppliers.

“Since some steel mills have already built up stocks in October, big traders have largely reduced their import orders because they do not see any improvement in prices in a well-supplied market,” said Jin Tao, an analyst with Guotai Junan Futures in Shanghai. ($1 = 6.1552 Chinese yuan renminbi) (Editing by Ryan Woo and Himani Sarkar)

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