Barclays sees a further decline in Chinese import data for March

CHINA March 25 2014 11:35 AM 

BEIJING (Scrap Register): Adding to fears of a weakening economy, Chinese oil and industrial metals imports fell back in February, though from what had been exceptionally high levels in January. Precious metals were a notable exception. Barclays expects a pick-up in Chinese growth momentum in Q2 and that should help support import demand, though the next set of import data for March is likely to show further declines.

Oil imports in February moderated from the peak in January, but remained above 6 mb/d for the third consecutive month. Among refined products trade, previously established trends remain in place with net fuel oil imports lower by 39% y/y in February, on the back of lower teapot refinery runs and feedstock substitution with crude oil. Diesel exports in February rose by 33% y/y, as recently increased export quotas were utilised. Overall, Chinese demand is still supported by steady activity and a rise of new refining capacity. The addition of new refining capacity this year (650 kb/d) is also expected to help support a moderate demand increase of 350 kb/d this year.

For base metals, the depressed environment for import financing, owing to very weak price ratios and the CNY depreciation, contributed to significant declines in refined metal import volumes, especially in copper and zinc. The significant weakness in refined nickel imports, falling to the lowest since June last year, indicates that the Chinese nickel market is clearly not yet at a stage where the Indonesian ore export ban is inducing a positive switch by stainless producers to refined units. But sharp declines in both bauxite and nickel ore imports point to the incremental impact of the Indonesian ban, with final shipments from Indonesia now having tapered off and a very limited supply picture currently from alternate sources. From a demand perspective, the data offered little in the way of positive signals to counteract current pessimism and uncertainty.

Precious metals imports into China were notably strong in February in both a m/m and y/y context, as platinum, palladium and silver imports were all strong. While admittedly January’s PGM import data indicated a soft start to the year, February has revealed whether the strength experienced towards the end of 2013 would continue into 2014 – and the answer is that it has thus far. Platinum imports were up, albeit lower than levels seen at the end of 2013, palladium imports were up more impressively, and Chinese silver import data was the highest since March 2011.