Cheaper prices drive China December commodity imports to record highs

[BEIJING] China imported record levels of crude oil, iron ore and soybeans in December as the country took advantage of cheap global prices to boost shipments, despite faltering demand growth at home.

The surge in shipments helped improve China's trade figures, according to data published on Tuesday by the country's customs authority. Total imports still dipped 2.4 per cent, down for a second month in succession, but they beat a decline forecast of 7.4 per cent.

"The surge in imports was largely due to the sharp drop in prices, which encouraged opportunistic restocking," said Nelson Wang, an energy analyst at CLSA Research.

Crude oil surged to a record 7.15 million barrels per day in December, confirming earlier predictions by Thomson Reuters Oil Research and Forecasts that China was seizing on tumbling global prices to to build up its strategic reserves.

While copper imports were flat in December compared to the previous month, deliveries for the whole of the year rose 7.4 per cent to a record high, with state stockpilers taking advantage of cheaper prices.

Steel mills also replenished their iron ore stockpiles in the final month of the year, driving imports to a record 86.85 million tonnes, after prices nearly halved over 2014 due to a supply glut.

Cheaper prices also drove coal imports to their highest level since January but it was not enough to prevent the first annual decline in at least a decade, following a series of measures from the government aimed at curbing oversupply.

China is the world's biggest buyer of iron ore, coal, copper and soy, and is the world's second-largest crude importer after the United States, and the country's slowing economic growth rates have sent shockwaves throughout global markets.

The role of the state has become decisive, with crude and copper shipments both rising as a result of efforts to fill strategic stockpiles and coal shipments suffering because of government policies to curb oversupply.

Though underlying demand in China is still relatively weak, low prices could keep import rates at a relatively high level into the new year, especially for crude oil, although shipments could be disrupted by the Chinese new year holiday in mid-February. "For oil, the record imports was clearly driven by low prices and shipments will continue to rise because current prices give the government a rare opportunity to build its strategic petroleum reserves," said CLSA's Mr Wang.

Soybeans could also remain at a relatively high level ahead of the Chinese new year, with buyers awaiting shipments booked three months ago, when prices were low and crushing margins relatively strong.

There could also be an upturn in domestic demand for copper in January, with banks likely to give more credit at the start of the year, analysts said.

Despite flat steel demand, iron ore shipments could also remain high, with cheaper foreign supplies likely to squeeze out more high-cost local producers.

REUTERS