Singapore, 21 April 2010

China's hunger for imported commodity and energy products grew sharply in March from February, with liquefied natural gas (LNG) imports jumping 26% and a 53% surge in copper. China's imports of LNG jumped to 599,740 tonnes in March, official customs data showed on Wednesday, while refined copper surged on arrivals of contracted shipments. The world's top consumer for many base metals and top producer of aluminium, lead and zinc imported 337,125 tonnes of refined copper in March, higher than a flat to lower level expected, the latest official customs data showed on Wednesday.

Traders said Chinese merchants had booked more spot refined copper in January-February when arbitrage buying from the London Metal Exchange to sell to Shanghai was attractive. Much of the booked shipments arrived in March.

"Price ratios in January-February were not bad and people should have booked more," a futures manager at a large Chinese trading house said.

"Spot bookings normally take 1-1.5 month to arrive," a trader who sold copper to China said, referring to orders to Chilean producers, China's top supplier.

Some trading sources also attributed March's strong imports to financing inflows as China’s recent tightening of monetary policy boosted demand for foreign-currency loans in the form of letters of credit to importers, who can sell the shipments and receive yuan.

Players for such imports usually are willing to take a loss up to 2,000 yuan a tonne, traders said. China's steel industry continued to vacuum up iron ore from all over the world.

The world's number one steel producer and consumer imported 59 million tonnes of iron ore in March, up 13.46 percent from a year earlier and an increase of 19.5% from February.

Total iron ore imports over the first three months of the year stood at 155 million tonnes, up 18% from a year earlier. China's implied oil demand in March rose 12.3% from a year earlier, the seventh month of double-digit growth in a row, as warming weather boosted dormant farming activities.

The world's second-largest oil user consumed 8.25 million barrels of oil per day last month, 4.6 percent or 400,000 bpd less than February, according to Reuters calculations based on official data released on Wednesday.

"Oil demand will be very robust in the upcoming months as its peak season for Spring ploughing now," an official from PetroChina said.

As the demand data stripped of impact from fuel stocks changes, which is not officially released in China, a sharp drop in refined oil inventory could imply that real demand was even higher than the data showed.

Combined stocks of gasoline, diesel and kerosene held by China's top two oil firms -- PetroChina and Sinopec -- dropped by 6.8% in March from February as domestic sales climbed by 30%, an industry official with knowledge of the data told Reuters on Wednesday.

The drop was the fastest rate since August 2009 and the sales rise and volume were at least the highest since the beginning of 2009 when Reuters started to compile China fuel stocks data.

Naphtha, Diesel Lead

Of the main refined fuels, demand for naphtha in March rose by 52% from a year earlier, the fastest pace compared with that of other products. Since late 2009, China has started up two 1 million tonne-per-year steam crackers that have spurred demand for the petrochemical feedstock.

A third big cracker is due on line late this month at Sinopec Corp's Zhenhai unit in eastern China that is set to lift naphtha demand further. Analysts said that China's gasoline demand will expand fast this year as the total number of China's passenger cars still keeps soaring after a whole year's exponential growth in 2009.

China's coal imports rose 16% from a month earlier to 15.22 million tonnes in March, the third-highest monthly imports ever, official customs data showed on Wednesday.

China's imports of steelmaking material coking coal in March jumped 23% from a month earlier to 3.38 million tonnes, up 77% from a year earlier, as the country's steel industry continued to boom. But thermal coal imports have slowed in April, as lower seasonal demand pressured domestic prices and made imports more expensive, traders said.

"Prices of imported coal are not ideal. For the same grade, they are at least 20 to 30 yuan more expensive than domestic coal," said a trader based in the eastern province of Zhejiang, who expected business to improve when summer arrived.

Domestic spot thermal coal prices edged up this week after remaining unchanged for two weeks, and an immediate take-off in prices is unlikely in the near term as summer demand is yet to emerge, traders said. China's coal imports hit a record 16.38 million tonnes in December 2009.

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