London, 24 May 2011: Commodities Now

Feeding the Dragon: Focus on China’s commodity imports is even sharper than usual as a result of recent commodity price fluctuations and concerns that China’s economic growth is slowing rapidly, according to Barclays Capital. However, April’s detailed import data continues to paint a strong picture for oil imports in particular, and although metals trade data have been a little softer, there are signs of improvement in the bellwether copper market.

“The latest Chinese data paint an extremely robust picture for oil, with demand coming in at its third highest levels ever in April, increasing 9.6% y/y. Gasoline and diesel demand remains well supported, while fuel oil demand is falling back as higher crude prices compress margins, especially for tea-pot refineries. With a precarious hydro situation potentially providing a further boost to thermal power generation and with diesel the ultimate swing fuel to meet that demand, increases in Chinese oil demand may be significantly higher than those currently embedded in consensus forecasts. Natural gas imports increased sharply on the back of pipeline flows from Turkmenistan. China’s only gas import pipeline is still running below capacity and could increase flows further later this year. LNG imports should increase with the start of a new regasification terminal this summer,” say BarCap.

Meanwhile, base metal imports were generally softer. Refined copper imports fell 48% y/y, and exports surged to 45Kt, the largest we have on record. The 27kt build in Asian LME inventories in April reflects this surge. More recently, however, the build in Asian warehouses has slowed sharply, perhaps signalling better trade data to come. China remained a net importer of primary aluminium. Imports of lead concentrate were strong because of strong imports from Peru, where some small mines are ramping up. Zinc concentrate imports were almost identical to the previous month, although refined metal imports remained strong in spite of the continued build in refined metal stocks in China. For precious metals, the picture was more mixed, with a slowdown in silver and palladium imports y/y but continued strength in platinum imports.

“China Customs agricultural commodity trade data for April showed firmer agricultural import demand after a rather muted Q1. Although China’s corn imports in April more than tripled m/m, they are still well below current export levels, and as a result, China remains a net exporter of corn for the second month on a row.,” BarCap confirm.

Ends --

www.barcap.com