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June 9, 2015

China Commodity Imports Plunge as Economy Slows

China’s imports of oil, copper and iron ore slid last month amid a broader slowdown in trade that highlights the country’s weakening economy and threatens growth targets.

Inbound shipments of oil dropped to the lowest in 15 months, overseas copper purchases retreated from the highest in a year and iron ore cargoes slid for a second month, data from the country’s General Administration of Customs showed Monday.

Weakening imports of raw materials will add to speculation that domestic demand in the world’s biggest consumer of energy, metals and grains is faltering. The Bloomberg Commodity Index of 23 commodities is extending its biggest slide since the 2008 global financial crisis amid concern the nation will fail to contain a slowdown.

“The macro economy is still weak,” Li Li, an analyst with Shanghai-based commodities researcher ICIS-China, said by phone. “Demand from the downstream heavy industrial sector, including transportation and property, have shown no signs of recovery.”

The country’s total imports shrank by the most since February while exports fell for a third month. That coincides with a slump in investment growth that’s putting Premier Li Keqiang’s 2015 expansion target of about 7 percent at risk.

The government is seeking to shift the country away from investment-led growth to a consumption-driven economy, prompting a slowdown in construction. As much as half of the country’s copper use and about 35 percent of its steel demand is related to housing and real estate, according to Goldman Sachs Group Inc.
Copper Output

Copper imports slid as the economy cools and domestic output rises, according to Yang Changhua, a senior analyst at Beijing Antaike Information Development Co. Lower demand for the metal in financing deals also reduced demand, Yang said.

The country’s production of refined copper has risen almost 12 percent to 2.4 million metric tons in the first four months of the year, according to the latest data from the National Bureau of Statistics.

The downturn in construction is also hurting domestic steel demand and the need for iron ore. Steel exports surged to a four-month high as exporters sought overseas buyers for the country’s surplus. A sharp downturn in construction activity linked to a weak Chinese property sector has hurt domestic steel consumption, pulling prices down 16 percent this year.

Crude oil imports declined from a record 7.4 million barrels a day in April amid increased refinery maintenance and as port storage facilities filled up, according to ICIS China, a Shanghai-based commodities researcher.
Top Spot

“The fall in single-month imports may be a result of peak refinery shutdown,” Amy Sun, an ICIS analyst, said by phone from Guangzhou. “Crude oil trading ports, especially Dalian, are also pretty full after the buying spree in April, leaving limited space for more stockpiles.”

The nation gave up its spot as the world’s biggest oil importer after overtaking the U.S. in April. It may resume purchases to take advantage of low prices and ample supply to fill emergency stockpiles, according to ICIS.
The Bloomberg Commodity Index rose 0.1 percent to 100.368 on Monday, trimming this year’s loss to 3.8 percent. The gauge slumped 17 percent in 2014.

Source: First Enercast Financial
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