China¡®s net metals commodities trade is slowing

Macquarie Research in Beijing notes that net Chinese imports of metals commodities are slowing down sharply as domestic production picks up.

Author: Lawrence Williams
Posted:  Monday , 31 May 2010

LONDON - 

The latest report from Macquarie Bank's China research division suggests that Chinese imports of commodities are falling as more material is being sourced from domestic sources and there is also an element of destocking apparent.  This change in pattern is seen to coincide though with a good pick-up in activity outside China and thus global demand is relatively unaffected so far.

Highlights from the Macquarie findings are as follows:

Latest production and trade data for April 2010 confirm the trend of a slowing in China's net imports of commodities. This reflects an ongoing destocking in most Chinese commodities, something that started in 3Q09, and also surging domestic production of commodities as imports are replaced with domestic production.

MASSIVE YOY PRODUCTION GROWTH AS CAPACITY REOPENS

The massive YoY growth of many commodities reflects the comparison with a year earlier when low prices had forced the closure of large parts of Chinese domestic output. The subsequent recovery in prices in 2H09 and 1Q10 has led to most of that capacity reopening.

NET IMPORTS ARE FALLING AND EXPORTS ARE RISING

China was a net importer of aluminium, lead and steel over the first four months of 2009. Now it is a rising net exporter. China's exports of flat steel products are back at peak levels, driven by a 75% MoM increase in hot rolled coil (HRC) exports in April. In zinc, nickel and tin, China's net imports of refined metal have collapsed from a year earlier. The slowdown in Chinese metal imports has been offset by a strong recovery in non-Chinese demand so far this year, reducing any negative impact.

APPARENT CONSUMPTION GROWTH IS SLOWING - DESTOCKING?

The data suggests a slowing rate of base metals and steel demand growth, in part reflecting some destocking activity (since most measures of actual activity, if anything were accelerating over the first four months of 2010). Once this destocking is complete, apparent demand will start to rise again.

To see the full Macquarie report click on here

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