China commodities demand likely to remain robust till end-2016, says ANZ

Demand for commodities in China is anticipated to remain robust till the end of this year, following better-than-expected economic data from China. Also, the widening trade surplus during the period of October will add on to market optimism.

Crude oil and coal imports stood out, climbing 9.3 and 54.5 percent y/y respectively. Even iron ore held up well, growing 7 percent y/y. However, the 20 percent y/y fall in copper imports exacerbates a trend that started in March. Imports of iron ore fell 31 percent m/m to 80.8 metric tons. On a seasonal basis the imports were relatively strong, up 7 percent y/y.

However, steel product exports fell 14.7 percent y/y to 7.7mt, fuelling suggestions that export-driven demand has weakened. Also, Coal imports dipped slightly, with September imports down 11.7 percent m/m to 21.6mt. But on a seasonal basis they remained strong, up 54.5 percent y/y and still the fourth highest level achieved over the past two years.

Seasonal trends continued to play out in China’s October commodity trade, with the most recorded double-digit percentage falls from September. However, they remained up on a y/y basis, indicating domestic demand remains strong.

Further, rising Chinese aluminium production is likely to be the reason behind the increase in exports. September output hit a 12 month high of 2.75 million tonnes. Copper imports weakened considerably in October, continuing a trend that emerged mid-year. China imported only 290kt of unwrought copper and products, down 14.7% from September.

Chinese oil imports also eased slightly in October but remained at elevated levels. Crude oil imports fell 20.6 percent m/m to 28.8 million tonnes (6.81 mb/d). However, on a seasonal basis it was up 9.3 percent y/y.

"We suspect imports were constrained by relatively full storage facilities. But with more capacity coming online, we believe this trend will be temporary," ANZ commented in its own research report.