China spends Jan­uary stock­ing up on cop­per, crude oil and iron ore

Data also show value of im­ports and ex­ports rises by about 10%

China Daily (Canada) - - BUSINESS - By DU JUAN dujuan@chi­

Driven by eco­nomic growth and a need to re­stock, China’s im­ports for crude oil and key com­modi­ties surged to a record high in the first month of the year.

Im­ports of crude oil, iron ore and cop­per are of­ten eval­u­ated as a sign of China’s eco­nomic strength, but a week­long Lu­nar New Year hol­i­day, which be­gan on Jan 31, can af­fect the mar­ket to cer­tain ex­tent when man­u­fac­tur­ers in­crease their in­ven­to­ries for pro­duc­tion dur­ing the hol­i­day.

China im­ported 28.16 mil­lion met­ric tons of crude oil in Jan­uary, up 11.9 per­cent yearon-year. The daily crude im­ports reached a new record of 6.63 mil­lion bar­rels, ac­cord­ing to data re­leased by the Gen­eral Ad­min­is­tra­tion of Cus­toms on Wed­nes­day.

Li Li, re­search di­rec­tor at ICIS C1 En­ergy, a Shang­hai-based en­ergy in­for­ma­tion con­sul­tancy, said in­ter­na­tional crude oil prices hit bot­tom in Novem­ber 2013, which gave traders and re­finer­ies the op­por­tu­nity to re­stock at a good price be­fore the Lu­nar New Year.

An­a­lysts said the ma­jor drive for China’s crude im­ports this year and the next is to build up medium- and long-term commercial and strate­gic re­serves, cre­at­ing a sat­u­rated sup­ply in the do­mes­tic oil prod­ucts mar­ket.

“The de­mand for crude oil from the new re­fin­ing ca­pac­ity is rel­a­tively low,” she said.

Iron ore im­ports also soared to a record high of 86.83 mil­lion tons in Jan­uary, up 18 per­cent com­pared with De­cem­ber, mark­ing a 33 per­cent in­crease year-on-year.

“It’s a rea­son­able growth rate,” said Zhang Tieshan, a se­nior an­a­lyst from in­dus­trial in­for­ma­tion provider Mys­

Many do­mes­tic steel mills were re­stock­ing ahead of the Lu­nar New Year hol­i­day, when trad­ing is usu­ally sus­pended, he said.

“The Chi­nese govern­ment opened iron ore im­port rights to pri­vate com­pa­nies dur­ing the sec­ond half of last year, which also con­trib­uted to ris­ing im­ports,” said Zhang. “Com­pared with the same pe­riod last year, there are more im­porters for iron ore at the be­gin­ning of this year.”

The growth of iron ore im­ports ex­ceeded mar­ket ex­pec­ta­tions. In fact, an­a­lysts be­lieved China, as the big­gest iron ore user in the world, would see im­ports de­cline at the be­gin­ning of the year.

“China’s cut in steel pro­duc­tion ca­pac­ity has not had a big ef­fect on iron ore im­ports. Mean­while, the in­flu­ence of en­vi­ron­men­tal poli­cies on steel mill pro­duc­tion and iron ore de­mand is re­gional,” said Zhang.

Late last year, the Chi­nese govern­ment an­nounced a cut of 80 mil­lion met­ric tons of steel pro­duc­tion ca­pac­ity in or­der to im­prove the in­dus­trial struc­ture and fight air pol­lu­tion.

Big steel pro­duc­ers such as those in He­bei prov­ince are af­fected by the pol­icy, but it did not have a na­tion­wide im­pact, said Zhang.

He pre­dicted that the coun­try’s eco­nomic growth will con­tinue to de­cline in the sec­ond and third quar­ters, which will re­sult in slower iron ore im­ports growth in the fol­low­ing months.

China’s crude steel out­put will grow at 3 per­cent to 4 per­cent year-on-year in 2014, es­ti­mated an­a­lysts at Mys­teel.

In ad­di­tion to iron ore, cop­per im­ports in Jan­uary to­taled 536,000 met­ric tons, a record high with a year-on-year growth of 53 per­cent. The fig­ure grew 22 per­cent, com­pared with the pre­vi­ous month. An­a­lysts said the soar­ing in­crease was also caused by un­ex­pected strength in re­stock­ing de­mand ahead of the Lu­nar New Year.

Gen­er­ally, China’s im­ports in Jan­uary in­creased 10 per­cent to $175.27 bil­lion, the fastest pace in six months, while ex­ports grew 10.6 per­cent to $207.13 bil­lion.

The stronger trad­ing growth has eased wor­ries about China’s eco­nomic slow­down, though most an­a­lysts be­lieve that the trade growth in Fe­bru­ary will ex­pe­ri­ence a slight slow­down.

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