Chinese commodity imports more important than sluggish exports



Clyde Russell

Published — Tuesday 11 December 2012

Last update 11 December 2012 3:59 am

| نسخة PDF Print News | A A

LAUNCESTON, Australia: If anybody is worried by the seeming weakness of China’s November trade data, then the commodity numbers should help reinforce the view that the recovery in the world’s number two economy is on track.
Exports rose a disappointing 2.9 percent in November, well down on October’s 11.6 percent gain, while imports were flat versus October’s 2.4 percent rise.
For exports, there was probably a tailing off because Christmas orders were likely shipped in the prior two months, and the ongoing drag from recession in Europe and sluggish recovery in the US also would have been a factor.
But exports are becoming relatively less important for the Chinese economy, with the policy emphasis on switching to domestic demand as the main driver of growth.
This can be seen by the higher-than-forecast 10.1 percent gain in industrial output in November and the 14.6 percent rise in retail sales, which also beat expectations.
On imports, especially on the commodity front, it appears lower prices may well have impacted the value figure, as the volume numbers show healthy demand across major items, such as crude oil, copper and iron ore.
Oil imports were the second-highest on record in barrels per day (bpd) terms, coming in at about 5.69 million bpd, about 110,000 bpd more than in October and behind only February’s 5.98 million bpd.
Oil demand has been rising as new refinery units come on stream, with two starting in October alone.
Another started in late November, meaning there’s a strong likelihood that crude imports will remain robust in December.
The new units are also slowly starting to make their impact felt on the net imports of refined products, which slipped to 1.35 million in November from October’s 1.37 million.
While there are restrictions on the export of some fuels, the ramping up of refinery capacity should at least mean fewer imports of products, thereby cutting the net import figure even if exports remain relatively stable.
The granting of licenses to directly import crude to smaller refineries, known as teapots, should also eat into product imports as much of these are in the form of fuel oil, which the teapots use as a feedstock.
Similar to oil, iron ore imports showed strong performance, jumping 17 percent from October to 65.78 million tons, the highest since January 2011.
While some of the rise was put down to mills restocking as prices of the steel-making ingredient rebound from third quarter lows, the ongoing resilience in iron ore would seem to point to solid industrial demand.
In year-to-date terms, iron ore imports are up 8 percent over the same period in 2011, despite the midyear slowing of growth in the economy, and also still ahead of a consensus forecast 6 percent gain in a Reuters survey last December.
Turning to copper, the picture is mixed, as the 13.5 percent jump in imports in November looks impressive at first glance, but in reality it only partially reversed the 18.5 percent drop in October from the prior month.
Taking the last two months together, given that October was disrupted by a week-long national holiday, and a picture emerges of virtually flat growth in copper imports.
The problem is that inventories remain high, equivalent to three months’ imports at current rates at more than 1 million tons.
And that’s just stockpiles in bonded warehouses, which don’t include other inventories, meaning the total may be closer to 1.4 million tons, representing a substantial overhang.
But in some ways it’s little surprise that the weakest of the major commodities would be copper, given its predominance in manufactured goods for exports.
It seems reasonable that copper will lag both iron ore, used more for steel for domestic construction and car assembly, and crude oil, used to fuel China’s expanding vehicle fleet.
The days of uniform strong gains across the commodity complex in Chinese import data are probably past.
What’s become clearer from data since the middle of the year loss of economic momentum is that the pick-up in demand will be lumpy and uneven.

— Clyde Russell is a Reuters market analyst. The views expressed are his own.

What's happening around Saudi Arabia

RIYADH: Some good news for less fortunate women in society. According to a survey, 77. 3 percent of young men are willing to marry divorced women, 67. 2 percent are ready to tie the knot with widows, while 74. 6 percent of them have no problem marryi...
RIYADH: Iranian Haj and Umrah pilgrims are welcome to enter the Kingdom and would receive all hospitality and courtesy afforded to Muslims from other countries, said Foreign Minister Adel Al-Jubeir here Thursday.He reiterated that the Kingdom’s decis...
RIYADH: A 78-year-old Saudi man has been infected with Middle East Respiratory Syndrome coronavirus (MERS-CoV) by a camel in Taif, according to a senior official in the Ministry of Health.“This is a sporadic case that happens due to humans' interacti...
RIYADH: A medical team at a hospital in Sakaka successfully conducted the first laparoscopic procedure of its kind in the region by using this modern technique.The medical team, headed by Dr. Sami Al-Asari at the King Abdul Aziz Specialist Hospital,...
DAMMAM: A study by the National Family Safety Program with 18,000 teenagers has revealed that 13 percent have been sexually abused, 53 percent neglected, and 80 percent faced various forms of physical and psychological abuse.The study also showed the...
AL-AHSA: The Saudi Commission for Tourism and National Heritage (SCTNH) has signed an agreement with the Ministry of Islamic Affairs to revamp, protect and document 900 ancient mosques in the Kingdom.Representatives from the SCTNH and the ministry he...
JEDDAH: Military items including uniforms, fabrics, belts and hats accounted for 19 percent of customs seizures during 2013 and 2014, with about 8,620 pieces seized in 98 operations at various border crossings.The spokesman for Saudi Customs, Issa Al...
RIYADH: Dr. Hazzaa Al-Zahrani, director of hematology and fellowship training programs at King Faisal Specialist Hospital and Research Center in Riyadh, has warned against the increasing risk of hemophilia in the Gulf region.He said about 75 percent...
RIYADH: The Ministry of Health has asked its various departments to review current inventories to ensure the availability of medicine and medical devices.The move was made after Health Minister Khalid Al-Falih ordered the reduction of medicines and m...
JEDDAH: A local charity has raised SR2 million to help pay for treatment needed by disadvantaged people in the country.The Charitable Health Society For Patient Care (Enayah), which ran its fund raising campaign under the slogan “Ensure my Treatment,...
JEDDAH: Prince Sultan bin Salman, president of the Saudi Commission for Tourism and National Heritage (SCTNH), has announced plans to develop the Kingdom’s islands in the Red Sea and Arabian Gulf into tourist destinations.This would be done after the...
RIYADH: Sri Lankan Ambassador Azim Thassim told his countrymen in the Kingdom that his mission has chalked out a 20/20 plan to promote bilateral relations with the Kingdom and to work for the welfare of the island’s 500,000 workers in Saudi Arabia.Th...
JEDDAH: The Special Criminal Court has sentenced a Saudi man to four years in prison for defying the country’s ruler and traveling to fight in Syria.The court found he had received weapons training and posted tweets about his experiences. He was also...
JEDDAH: Saudi Arabia is ready to join any ground operation against Daesh in Syria if required by the US-led coalition, said Brig. Gen. Ahmed Al-Assiri, spokesman for the Saudi-led coalition in Yemen, on Thursday.“The Kingdom is ready to participate i...
RIYADH: The World Bank and the Saudi Commission for Tourism and National Heritage (SCTNH) are working in close cooperation to promote investments for the rehabilitation of historic city centers in the Kingdom, an SCTNH spokesman said on Wednesday.In...

Stay Connected

Facebook