Chinese March commodity imports still weak: Barclays

CHINA April 23 2014 11:11 AM

BEIJING (Scrap Register): China’s imports of key raw materials softened again in March as the stock-building boost to imports of commodities like crude oil and copper continued to fade.

There were some signs of underlying strength, especially in demand for transport fuels and some precious metals.

Barclays economists expect the momentum of Chinese growth to improve from the second quarter onward, but the short-term outlook for both local commodity demand and imports looks like remaining weak overall.

Oil Demand
China’s oil demand improved modestly after falling 2.8% year-on-year (y/y) in Jan-Feb. The March total was up 0.6%, supported mainly by strong gasoline and jet fuel demand, both up by around 15% y/y. Of particular note for oil markets is that China became a net product exporter for the first time since August, totalling 120kb/d. However, with refinery maintenance starting in Q2, demand is likely to stay sluggish with diesel and naphtha the weakest part of the barrel.

Base Metal Demand
In base metals there were marked contractions in imports of raw materials from Indonesia, reflecting the impact of an export ban on metal ores. Nickel ore imports from Indonesia fell 59% y/y, whilst bauxite imports from the same destination fell 60% y/y.

Domestic nickel output is holding up for now and so imports of refined nickel have not yet started to expand, though Barclays expects that they will later this year once stockpiled nickel ore starts to be depleted.

In contrast, imports of copper concentrate stayed very strong, up 20% y/y, as smelters took advantage of ample availability and high treatment charges. Given the strong resulting output, apparent consumption of refined copper expanded 24% y/y, though we believe that underlying demand was much weaker – and with less financing activity refined copper imports could continue to fall in the next few months.

PGMs Demand
In the PGMs, imports stayed strong, especially in palladium where imports at 77koz were at their highest since November 2013. PGMs demand is underpinned by healthy auto production growth and sales with March auto sales up 9% y/y.