Jun 21 , BEIJING (Dow Jones)--China's refined copper imports fell in May from both the previous month and the same month a year earlier, but output data and Shanghai Futures Exchange inventory levels indicate that growth in apparent consumption is still robust, Barclays Capital said Tuesday.
Trade data for May confirmed that demand growth slowed to more sustainable levels as the government took steps to cool the housing and credit markets, it said in a research note.
The month's refined copper imports were down 10% from April and 17% from May of 2009 to 279,690 metric tons, data issued Monday by the General Administration of Customs showed.
However, domestic production of refined copper was up 18% from a year earlier to 398,000 tons in May.
"This, together with a 32,000-ton fall in Shanghai Futures Exchange stocks over May, suggests that apparent consumption managed to grow by close to 10% on year," Barclays Capital said.
"We believe that little of the growth has gone into unreported stock building, and destocking is likely to have continued into May."
Most indicators still point to a relatively tight domestic market in terms of supply, with prices in the physical market still at a slight premium, and the spread between SHFE and London Metal Exchange prices remaining at a level favorable for imports, the research house said.
China was also a net importer in May of 2,800 tons of aluminum, according to the customs data, and "there has been little evidence of significant production cuts as yet," Barclays Capital said.
With aluminum production growth still strong, the data suggests destocking, it said.
The research house believes domestic output of refined zinc has started to fall, however. Imports in May dropped 68% from a year earlier to 30,611 tons.
"We believe the domestic (zinc) market is in surplus, but poor margins are starting to result in smelter production cuts and a reluctance to sell."
Beijing's move over the weekend to allow the currency to appreciate has been positive for sentiment in the metals markets because it could boost purchasing power, but it's unlikely that a stronger yuan would dramatically alter the commodity trade picture, Barclays Capital said.
"Any appreciation in the value of the yuan is likely to be gradual, and in any case, an increase in the flexibility of the (yuan exchange rate mechanism) has long been expected."