China’s January trade data shows disappointing picture of import demand

Overall commodity import volumes of China increased in January. However, they fell for certain important commodities. The seasonal disturbance related to the Lunar New Year holiday might be a factor for some of the weakness in the recent figures.

China's January's total import bill declined 18.8% y/y in US dollar terms, as compared with December's fall of 7.6%. On the contrary, the volume of major industrial commodities imports grew 11.8%, implying that demand from China remains more resilient than the import value data show.

In monthly terms, imports of iron ore, oil and copper fell, after strong performances at the end of 2015. However, copper and iron ore imports continued to increase in year-on-year terms. This shows that the seasonal disturbances associated with the Lunar New Year holiday and typhoon season might partially be responsible for the weak performance.

Demand for copper is supported by increased infrastructure spending on electricity grid. Meanwhile, coal imports are in long-term decline, as China continues to shift to cleaner forms of power generation.

Meanwhile, China's steel exports declined again in January. Additional weakness in steel exports is expected in the coming months.  China's overseas sales of aluminium and petroleum products kept their upward trends. This shows China's attempts to export the major domestic oversupply in both sectors.

Overall, China's trade data in value terms for January gave a slightly disappointing picture of the country's import demand. However, declining global commodity prices have pulled down values, while volumes actually expanded.