China March commodity imports resilient despite slowing economy
By Ruby Lian and David Stanway
SHANGHAI (Reuters) - China's imports of iron ore and copper soared in March from the previous month in anticipation of higher seasonal demand in the world's top metals consumer, though crude oil shipments dropped after three months of high inbound volumes.
The double-digit monthly gains in iron ore and copper shipments came even as China posted weak trade data, raising doubts whether the high commodity import levels are sustainable and reinforcing forecasts that the world's second-largest economy has slowed notably at the start of 2014.
Iron ore imports were up 19.4 percent over the first quarter as a whole, while copper rose by 37 percent over the period, but analysts suggested the dramatic surges did not reflect underlying demand.
"The overall strength in Q1 commodity imports masked muted downstream demand, and China will need to chew through stock overhangs as the economy recovers gradually," said Sijin Cheng, analyst with Barclays Capital, in an emailed note.
China's exports unexpectedly fell for the second straight month in March and import growth dropped sharply, customs data showed on Thursday.
Hopes of a major stimulus package from the central government to counter the slowdown were dashed by Premier Li Keqiang at an investment forum in the southern island of Hainan on Thursday.
As part of Beijing's efforts to restructure its economy and push financial reforms, Beijing has vowed to tackle overcapacity in heavy industries by pledging tougher credit conditions and environmental protection measures, a move seen curbing demand growth for metals this year.
Still, the second quarter is traditionally the brisk consumption season for industrial commodities, as construction activities pick up and export orders rise, encouraging buyers to take on additional cargoes.
China's iron ore imports rebounded in March to 73.96 million tonnes, up 21 percent from a 13-month low the previous month, boosted by rising steel production, increasing supplies of overseas iron ore and falling prices. It defied longstanding concerns about the health of the domestic steel market.
Copper imports also rose 10.8 percent to 420,000 tonnes in March from February, and the resilience of imports could support global prices which fell about 5 percent last month, the sharpest decline since June.
However, analysts said the increase, which was expected, was tempered by poor arbitrage ratios, which has cut demand for financing imports.
CRUDE OIL, SOY DECLINE
China's crude oil imports in March fell to a five-month low, dropping to less than 6 million barrels per day (bpd), though the figure was up 2 percent from a year ago as state-oil firms started up larger term contracts with suppliers such as Iraq and Russia.
Real demand in the world's top energy consumer was softer than expected as oil product inventories surged over the December-February period.
"With January-February refinery throughput down 2 percent year on year, crude imports flowed into commercial storage, and China may have built strategic storage as well," said Cheng of Barclays.
Imports of soy inched down slightly to 4.62 million tonnes in March from 4.808 million tonnes in the previous month as negative processing margins and tightening credit prompted the world's top buyer to cut purchases, and analysts expect imports to decline further in April.
"The crush margin for imported beans collapsed starting in February and has been negative for over a month now," said Ivan Szpakowsky, analyst with Citigroup, in an emailed note.
Trade sources have said that Chinese importers have defaulted on at least 500,000 tonnes of U.S. and Brazilian cargoes, with credit unavailable as a result of sustained crushing losses, and this could also have an impact on orders later in the year.
(Editing by Muralikumar Anantharaman)
