China's copper staged a strong comeback in June, but the outlook was marred by falls in a list of other key commodities, showing that Beijing's cooling measures were weighing on the economy. Crude oil imports fell 11.5 percent from a year ago to their lowest in eight months, while aluminium dropped about 14 percent, iron ore was down 4.3 percent and soybean shed 5.7 percent from May.
On the whole, the nation's imports grew a surprisingly weak 19.3 percent in June from a year earlier, slowing from the 28.4 percent pace in May, adding to a growing list of evidence that the tighter monetary policy has begun to bite. Analysts said there was no reason to sound alarm bells yet, as the fall in crude imports was largely due to a heavy maintenance programme and the overall import numbers for other commodities were still proving resilient.
June is also traditionally a period of seasonal demand lull due to widespread power shortages and rationing across the country. "The fall in crude imports was quite a surprise but the overall numbers are still looking pretty decent. One has to take into account that some of the pullback we're seeing in oil and other commodities has come after months of successive gains," said an Australia-based analyst who declined to be identified due to company policy.
Looking ahead, analysts mostly believe that China's commodity demand will rebound in the second half as the country kicks off a massive social housing programme, although that would also depend on whether Beijing tightens its monetary policy further. China has raised rates five times since October, alongside nine increases in the required reserve ratio for banks. Several economists think Beijing is near the end of its policy tightening.
COPPER REBOUND Copper imports in China, the world's leading copper and aluminium consumer, snapped two months of decline to rise 9.9 percent to 280,009 tonnes in June, data showed. From a year ago, however, June's volumes were still down 14.7 percent and total copper imports of 1.7 million tonnes for the first six months of 2011 remains down 23.8 percent from a year earlier.
"June's arbitrage ratios were attractive for imports," Zhuo Guiqiu, an analyst at Minmetals Futures said, adding that some of the imports may have been delivered from the LME warehouses in Singapore and South Korea, the nearest LME warehouses to China. "Demand was not bad in June and should be able to absorb increased imports."
Zhuo said he expected imports in July to be flat or fall slightly from June since the arbitrage between the cash LME and Shanghai copper contract turned around in the beginning of July. Imports of unwrought aluminium, including primary, alloy and semi-finished aluminium products, fell by 13.9 percent to 64,491 tonnes. China had shipped in 74,880 tonnes in May.
"The spread between LME and Shanghai local prices lately does not support imports or exports into China. The Chinese market is in a supply-demand equilibrium now and people are waiting for international prices to fall much more before buying," said CRU analyst Wan Ling.
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