--Clyde Russell is a Reuters columnist. The views expressed are his own.--
By Clyde Russell
LAUNCESTON, Australia, Dec 8 (Reuters) - It’s getting harder to pull together a convincing, all-encompassing narrative for China’s commodity imports, with the November trade data showing a fractured picture.
One of the market expectations has been that the sharp drop in many commodity prices would boost imports by the world’s biggest buyer, partly for stockpiling and partly to meet improving demand on the back of higher exports and domestic consumption.
This theme may hold true for imports of crude oil and copper, but certainly doesn’t apply to iron ore and coal
Crude oil imports rose to 25.41 million tonnes in November, equivalent to about 6.18 million barrels per day (bpd), up from 5.67 million bpd in October.
While China also remained a net exporter of refined fuels in November, it was only just, with customs data showing net exports of 70,000 tonnes, or about 7,000 bpd, down from October’s net exports of about 202,500 bpd.
What this shows is that the additional crude being imported isn’t being re-exported as refined fuels, meaning it is either being consumed domestically or put into storage.
It seems most likely that crude is flowing into both strategic and commercial storages, given that implied demand, which is calculated by combining refinery throughput and net fuel imports, fell in October to 10 million bpd from September’s 10.3 million.
In copper, the likelihood is also that strategic stockpiles are being boosted, with November imports rising 5 percent from October to a seven-month high of 420,000 tonnes.
Imports of anode, refined copper, alloy and semi-finished copper would have been boosted by the narrowing of differentials between domestic and London Metal Exchange prices.
But overall, it appears the State Reserves Bureau, the government stockpiler, has continued its strong buying of the metal this year, judging that prices are relatively cheap.
Ongoing weakness in London copper, which hit a four-year low of $6,230.75 a tonne on Dec. 1, may result in more buying for stockpiling in coming months.
However, there was no stockpiling buying in evidence in iron ore, with imports dropping 15.1 percent to 67.4 million tonnes in November from October.
This was the second-weakest month this year and the most likely factors at work are soft demand for steel in China as residential construction slows, coupled with a belief among steel mills that iron ore prices will fall further in coming months, meaning they can hold back on re-stocking.
Certainly the mass of additional supply coming onto the market from expansions in Australia and Brazil support the view that prices are still biased lower.
The only hope for iron ore is that China acts to stimulate its economy in 2015, thereby boosting steel demand for infrastructure projects.
This may be an increasingly likely hope, with the overall trade data showing that the economy is under some stress, given exports rose 4.7 percent from a year earlier, well short of the median forecast for a jump of 8.2 percent.
Of more concern was that the value of imports fell 6.7 percent from a year ago, while they had been forecast to rise 3.9 percent.
While some of this decline can no doubt be attributed to lower commodity prices, worryingly it also points to softer domestic demand, making a second interest rate cut in coming weeks all the more likely.
This may be enough to brighten the prospects for increased commodity imports, but it will probably take more than monetary stimulus to spark sustained growth.
Currently, if there is a theme for commodity imports, it’s that only those commodities being stockpiled for strategic reasons are showing growth, with the others fitting the narrative of a Chinese economy losing steam. (Editing by Himani Sarkar)