China
showed robust demand for crude oil and coal in May, shrugging off higher
prices to boost imports by more than 20 percent, but its appetite for
overseas copper supplies remained sickly and iron ore buying showed signs
of ending a strong run.
Economists are watching closely for
signs of slowing economic growth in
China
, which would reduce demand for raw materials, as the government tightens
the money supply to prevent inflation.
But many analysts see commodity demand
continuing strongly, as the country ploughs money into massive development
projects and struggles to overcome power shortages which could prompt fuel
imports and cut
China's own output of industrial metals.
The main disappointment for commodity
markets in the May trade data, issued on Friday by
China's General Administration of Customs, was copper. Shipments to
China, the world's biggest user of the metal, were even thinner than
expected, at 254,738 tonnes of unwrought copper and semi-finished copper
products.
Analysts say that was caused by buyers
turning to stockpiles to meet demand and expect imports to revive in the
second half of the year. However, the decline in May, when many had
expected a modest increase, ups the ante for June. "We expect to see
a sharp rebound in June and traders will have had to be more aggressive
bringing copper through customs. A 20 percent rebound from the current
levels is possible," said Judy Zhu, commodity analyst at Standard
Chartered Bank. Analysts and traders estimate that bonded stocks of
copper, imported in previous months but not assessed for value-added tax,
fell from 550,000-700,000 tonnes in early April to 350,000-500,000 tonnes
last week. High take-up of stocks would help explain why imports were so
low, plugging a big hole in apparent demand. Another consolation for
copper bulls was the figure for imports of copper scrap, a cheaper
alternative for smelters and fabricators, which rose 5.3 percent on the
month to 400,000 tonnes, up 21.2 percent from May 2010.
IRON
ORE
SLOWING
A more serious threat to China's
suppliers than the apparent lack of copper buying may be the slowing of
iron ore imports, which hit 53.3 million tonnes, just 0.8 percent up from
the shorter month of April.
That volume was 2.7 percent up from May
2010, although the total cost of iron ore imports rose by a third to $8.9
billion.
China's
steel sector, which accounts for almost half of world steel output,
normally slows in the second half of the year and faces twin headwinds in
2011: monetary tightening and power shortages.
Data from China Iron & Steel
Association shows steel output may have peaked at a record of almost 2
million tonnes per day in mid-May, since it fell 3.5 percent in the latter
part of the month.
At the same time, stockpiles of iron ore
at
China's ports soared to a record, signalling an increasingly sated market,
and industry champion Baosteel said this week it would cut prices.
"I expect shipments to fall in June
as steel mills have axed their buying and consumed more domestic ore to
feed demand," said an iron ore trader in Shanghai.
CRUDE OIL COST AT RECORD $18 BILLION
While copper wilted and iron ore
wobbled, crude oil imports held up despite high prices following the
turmoil in
Libya
and topped 5 million barrels per day for the fifth month in a row.
The monthly import volume was flat at
21.55 million tonnes in May, although on a daily average basis that
translated to a 3 percent slowdown, at 5.07 million barrels per day. The
cost to
China
burst through $18 billion for the first month ever.
That's a 70 percent leap in oil spending
compared to May 2010, while volumes rose 20.7 percent.
"There are signs that
China's economic growth is moderating, but its oil appetite may not slow
that much, because
China
is expanding its emergency oil reserves," said an analyst with a
foreign consultancy in
Beijing
, who declined to be named due to company policy.
In coal,
China
imported 13.4 million tonnes in May, judging by Customs' figures for
year-to-date imports of 56.88 million tonnes. That would put May imports
20.7 percent up from the 11.1 million tonnes imported in April. Net coal
imports grew even faster, since coal exports fell to a four-year low.
"The rise of domestic prices and the emergency need from coal-fired
power plants have discouraged exports. One of the policy responses to the
ongoing power shortage is to increase coal inventory," ANZ analysts
said in a research note. The increase in May consolidated a resurgence in
coal imports after a slow start to the year. Coal imports for June are
poised to rise further and could top 16 million tonnes, according to some
trade estimates, as domestic prices soared to a 2-1/2 year high and power
plants boosted run rates to cope with peak summer demand that will stretch
on until August.
Domestic thermal coal prices climbed for
a 12th week to above $130 per tonne.
Source:
Mining Weekly |