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China commodities imports rebound on low prices, stimulus hopes

China posted a strong rebound in commodities imports in September, with iron ore, copper and coal seeing double-digit percentage growth from the previous month, although the gains were linked to opportunistic buying due to weak global prices.

Crude oil imports also rose a stronger-than-expected 13 percent in September from August, but analysts said the country may be boosting its strategic reserves given demand growth in the world's largest energy consumer remains subdued.

In the case of iron ore and thermal coal, traders said weak prices and hopes that Beijing would roll out further stimulus measures in the fourth quarter had spurred bargain hunting.

"Domestic demand for most commodities, whether it is coal, steel or copper, remains weak, and I think the September rebound was driven by early cargo arrivals and bargain hunting," said Zhao Zhichao, an analyst at Yongan Futures.

Overall trade data released on Monday showed China's total exports in September beat forecasts, but economists said it was still too soon to tell if the country's trade sector has turned the corner.

CRUDE OIL

China's crude imports rose a stronger-than-expected 7.4 percent in September from a year earlier to 27.58 million tonnes, or 6.7 million barrels per day (bpd), which was the second-highest on record, according to official customs data.

"A big chunk could be going to fill the strategic oil reserve, which has nothing to do with underlying demand," said Simon Powell, Hong Kong-based head of Asia oil and gas research at CLSA.

China generated an oil surplus of more than 400,000 bpd in the first eight months of the year, based on a Reuters analysis of Chinese government data on crude output, net imports and refinery throughput.

Separately, data also showed China imported 2.47 million tonnes of oil products in September and exported 2.15 million tonnes, leaving net oil product imports at 320,000 tonnes.

IRON ORE

The world's top buyer of iron ore imported 84.69 million tonnes of the steelmaking ingredient in September, the second highest this year and up 13.1 percent from the previous month, official data from China's customs authority showed on Monday.

Shipments for the month were also up 13.6 percent from a year ago, bringing total imports for the first nine months of the year to 699.07 million tonnes.

"Since steel futures hit a record low in September and steel mills were largely cutting output that month, the rise in imports was largely driven by opportunistic buying," said Wang Lian, a Beijing-based analyst at Hong Yuan Futures Brokerage.

Analysts said the drop in iron ore prices .IO62-CNI=SI, which have plunged 40 percent this year to hover near a 5-year low of below $80 a tonne, may also have forced more local mines to shut, prompting steel mills to turn to imports.

Looking ahead, restocking by mills in the fourth quarter, along with high production in Australia and Brazil is expected to keep imports elevated until the end of the year, said Graeme Train, an analyst at Macquarie Bank.


COAL, SOYBEANS

Coal imports rose 12.2 percent from a month ago to 21.16 million tonnes but traders expect shipments to fall sharply this month onwards due to the reinstatement of China's import tariffs from Oct. 15.

Hit by weak demand and falling domestic prices, imports have already fallen 6.7 percent in the first nine months of the year.

China, the world's largest soy buyer, purchased 16.6 percent fewer soybeans in September than in the previous month, amid expectations that poor processing margins will prevent fourth-quarter shipments from gaining on last year.


Source: Reuters