SHANGHAI (Reuters) - China’s key commodity imports, including crude oil, copper and iron ore, all climbed in August from the previous month, adding to evidence that demand in world’s second-largest economy was still going strong despite the economic turmoil in the West.
The wave of buying of oil and industrial commodities suggests that Chinese companies remain confident about the domestic economy and that they would likely see any price corrections as a rare restocking opportunity — a move which should offer strong support to commodity prices.
With China’s inflation having pulled back in August from a three-year high, market watchers also expect the central bank to hold off further tightening measures, which could in turn ease the credit crunch and potentially draw producers and traders to import more raw materials.
China imported 21.04 million tons of crude oil in August, up 1.8 percent from the 20.66 million in the previous month, according to Reuters calculations using the revised July numbers.
Although implied oil demand in August slipped to the lowest rate this year, plant maintenance and accidents were the main reasons behind the dip and traders generally expect demand to improve from September.
“August-arrival crude cargoes were mostly loaded in June and July, when oil prices fluctuated a lot,” said a crude oil trader.
Data from the General Administration of Customs also showed China’s iron ore imports in August jumped 33 percent from a year ago to a five-month high of 59.09 million tons, thanks to the steel sector’s robust production.
However, analysts have cautioned that steel output could decelerate in the coming months amid a seasonal demand slowdown.
Despite slowing export growth due to the economic malaise in the United States and Europe, China’s economy has continued to grow at an enviable clip of over 9 percent, thanks in part to the government’s construction of over 10 million houses as well as feverish investments in the less-developed mid and western provinces.
These two factors have led Chinese mills to churn out near record amount of steel, cement plants to ramp up production and metal smelters to expand capacity — bolstering the country’s voracious appetite for a raft of commodities.
COPPER DEMAND UP FOR 3rd MONTH
Imports of unwrought copper to China, the world’s No. 1 consumer of the metal, posted a third monthly gain of 11.0 percent — the highest since March — to 340,398 tons in August, as buyers took advantage of lower prices overseas.
Compared to a year ago, however, copper imports remain down 10.3 percent, with year-to-date shipments down 20.5 percent.
Fu Bin, an analyst at Jinrui Futures, said China had kept on buying spot copper in recent weeks as arbitrage windows continued to surface, a trend which should support import numbers for September and October.
Unwrought aluminum imports posted smaller monthly gains of 0.8 percent, but declined 2.3 percent from year ago.
Soybean was the only laggard of all commodities, falling 15.7 percent from the previous month to 4.5 million tons as high prices overseas led crushers to turn to domestic supplies.
Amid the economic doom and gloom in the eurozone and United States, investors have wondered if China, one of the top buyers, would be able to avoid a hard landing.
However, a series of economic data released over the past few months has suggested that domestic demand was holding up relatively well, although overall economic growth has eased.
Statistics released on Friday showed industrial output moderated only slightly to gain 13.5 percent in August from a year earlier, while fixed-asset investment, a primary driver of the country’s economic growth, rose 25.0 percent in the January-August period from a year earlier.
Additional reporting by Judy Hua, Polly Yam and Ruby Lian; Editing by Raju Gopalakrishnan