RE­TURN OF CHINA TRADE FIG­URES RE­VEALS STRONG METAL IM­PORTS

The Gulf Today - Business - - SPECIAL REPORT -

LON­DON: China’s im­ports of re­fined base met­als have been run­ning at a ro­bust pace this year, with flows of cop­per, zinc and nickel up on a year ago and the coun­try on track to be a net im­porter of lead for a sec­ond year run­ning.

Six months after the China’s cus­toms de­part­ment stopped pub­lish­ing de­tailed monthly re­ports via com­pa­nies such as Reuters, some light has re­turned to what is hap­pen­ing with the world’s largest met­als buyer.

It has done so in the form of a new cus­toms de­part­ment web­site with a search­able data­base for this year’s trade flows. It’s in Chi­nese only and de­cid­edly userun­friendly, but it’s the real thing, cross-check­ing ac­cu­rately with the first-quar­ter fig­ures re­leased un­der the old distri­bu­tion sys­tem.

An­a­lysts at Refini­tiv have re­con­structed the coun­try’s head­line trade in the six months of sta­tis­ti­cal dark­ness that fol­lowed the sus­pen­sion of the old ser­vice.

The picture that emerges is one of ro­bust im­port ap­petite for re­fined metal but sig­nif­i­cant changes in flows of raw ma­te­ri­als.

Re­fined cop­per im­ports rose by 20 per cent to 3.1 mil­lion tonnes in the first 10 months of this year.

Although there has been a steady monthly flow of ex­ports over the course of 2018, the pace has dropped 15 per cent on 2017 lev­els, mean­ing that net im­ports are up by 24 per cent at 2.9 mil­lion tonnes.

Im­ports of con­cen­trates have climbed by 19 per cent to 16.6 mil­lion tonnes (bulk weight), a record for the first 10 months of the year.

A com­bi­na­tion of in­creased sup­ply and smelter out­ages in In­dia, the Philip­pines and Europe has al­lowed Chi­nese con­cen­trate buy­ers to step up pur­chases from the in­ter­na­tional mar­ket.

Scrap im­ports, on the other hand, have slumped by 36 per cent, re­flect­ing China’s crack­down on im­ports of lower-qual­ity material and the re­tal­ia­tory du­ties the coun­try slapped on US scrap in Au­gust.

How­ever, the mil­lion-tonne drop in scrap im­ports has been largely mit­i­gated by a sharp rise in the cop­per con­tent of the scrap.

Refini­tiv an­a­lysts use an im­plied con­tent cal­cu­la­tion to de­ter­mine that, in terms of contained metal, this year’s im­ports are down only 6 per cent on last year.im­ports of primary alu­minium were 21,000 tonnes in Oc­to­ber, the high­est monthly to­tal since Jan­uary 2017.

How­ever, cu­mu­la­tive im­ports over the first 10 months of this year fell by 33 per cent to 69,000 tonnes, still only a drop in the alu­minium ocean and dwarfed by the flow of semi-man­u­fac­tured alu­minium prod­ucts out of China.

Oc­to­ber’s spike may re­flect tem­po­rary tight­ness in in­got avail­abil­ity in the east of the coun­try as ship­ments of alu­minium from smelters in the north­west are dis­placed by high-pri­or­ity coal freight ahead of the Chi­nese win­ter.

The real stand-out in the alu­minium fig­ures has been China’s flip from net im­porter to net ex­porter of in­ter­me­di­ate material alu­mina.

Oc­to­ber’s ex­ports of 460,000 tonnes bring the year-to-date to­tal to al­most 1 mil­lion tonnes.

China has never ex­ported such quan­ti­ties of alu­mina in the past and the turn­around speaks vol­umes about how tight the mar­ket out­side China has be­come after the en­forced cur­tail­ment of Hy­dro’ s Flu­o­rite re­fin­ery in Brazil.

Im­ports of alu­minium scrap, by con­trast, are steadily fall­ing in re­sponse to the same drivers as those af­fect­ing cop­per - namely higher pu­rity re­quire­ments and du­ties on US scrap flows.

Head­line im­ports have dropped 27 per cent to 1.3 mil­lion tonnes, with both Septem­ber and Oc­to­ber im­ports fall­ing be­low the 100,000tonne level for the first time since Fe­bru­ary 2016.

Im­ports of re­fined zinc hit a year’s high of 80,600 tonnes in Oc­to­ber, the high­est monthly fig­ure this year.

Cu­mu­la­tive im­ports have risen 13 per cent from last year’s record flows to 508,000 tonnes.

Mined con­cen­trates im­ports have also been run­ning at a healthy clip, up 19 per cent to 2.4 mil­lion tonnes bulk weight.

The root cause of both higher raw material and metal im­ports is the strain on do­mes­tic con­cen­trates avail­abil­ity as a host of smaller op­er­a­tors have been forced out of the mar­ket by Bei­jing’s en­vi­ron­men­tal crack­down.

Even with com­pen­satory off­set from in­creased im­ports, China’s smelters have been strug­gling to cope with mar­gin com­pres­sion, re­sult­ing in five con­sec­u­tive months of fall­ing do­mes­tic re­fined zinc pro­duc­tion, of­fi­cial fig­ures show.

China’s net im­ports of re­fined lead have bucked the broader trend, fall­ing 35 per cent year on year to 47,000 tonnes for Jan­uary-oc­to­ber.

How­ever, un­til last year the coun­try was a net ex­porter of lead in this form and the flip to net im­porter sta­tus is set to con­tinue for a sec­ond year.

Drilling a lit­tle deeper into the fig­ures shows im­ports are boom­ing again after a five-month lull in the Jan­uary-may pe­riod, when China was again a net ex­porter.

Oc­to­ber’s tally of 20,000 tonnes was the high­est monthly im­port to­tal since May 2009.

It’s worth not­ing that, un­like zinc, lead raw material im­ports have also been de­clin­ing. In­flows of con­cen­trates dropped 8 per cent for Jan­uary-oc­to­ber, ex­tend­ing a three-year slide.

A shortage of raw ma­te­ri­als, both of mined con­cen­trate and scrap, has hit do­mes­tic re­fined lead pro­duc­tion, ex­plain­ing the stepped-up im­ports of metal.

Re­fined net nickel im­ports in the first 10 months of this year in­creased by 14 per cent to 177,000 tonnes.

The real story, how­ever, is what has been hap­pen­ing in in­ter­me­di­ate and raw material flows.

Im­ports of ores and con­cen­trates have risen by 37 per cent to 40.2 mil­lion tonnes, al­most back to the lev­els before In­done­sia banned ex­ports of un­pro­cessed nickel ore in 2014.

In­done­sia has since re­laxed its ban and the re­sumed flow of ore in such quan­ti­ties sug­gests that China’s nickel pig iron (NIP) sec­tor is also in ro­bust good health.

The flip side of In­done­sia’s chang­ing nickel land­scape has been a sharp drop in China’s im­ports of In­done­sian NIP as more material is di­verted into a grow­ing do­mes­tic pro­cess­ing sec­tor, led by Chi­nese stain­less gi­ant Ts­ing­shan.

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