China's metals imports and exports in the second half of the year will largely depend on the response of the economy, and especially the property market, to the recent appreciation of the yuan, analysts said on Monday.
China's net copper imports in June rose as peak domestic spot prices the month before lured in more of the metal, while net aluminium exports slowed that month due to Beijing's efforts to stem the tolling and processing trade.
"If the hot money expects further appreciation, that should help support real estate prices," said metals analyst Wang Zheng at Shanghai Dalu Futures said.
Speculators could boost housing prices by using homes as a place to park savings until a further appreciation.
Rising apartment prices generate demand for aluminium and copper, since Chinese home buyers usually purchase a concrete shell and only fit it out when they intend to move in.
"But if people expect the yuan to appreciate more, they won't choose to import copper now," he added. Further appreciation would make copper, which is priced in dollars on the international market, cheaper for importers holding yuan.
Beijing appreciated the yuan by about 2 percent on Thursday, and moved the currency to a managed float that would accommodate further appreciation or depreciation.
Non-deliverable forwards, derivatives used by foreign investors to bet on the yuan's future value, show expectations of a 4.7 percent rise in one year to 7.745 per dollar.
China imported 692,394 tonnes of refined copper in the first half of the year, up 4 percent from the same period in 2004. Net imports rose 8 percent on the month to 127,317 tonnes in June.
Beijing has tried to steer China's growth of over nine percent a year into manageable channels by restricting loans and reining in industries that are heavy polluters and power consumers.
Lending constraints helped pressure property prices in the second quarter, which in turn depressed steel prices as capacity expansions outpaced demand.
The yuan appreciation coupled with Beijing's efforts to consolidate the steel industry may act as an additional brake on expansions, especially by smaller, more speculative mills.
Despite the curbs, however, China's net imports of steel products rose to 320,000 tonnes in June from 40,000 tonnes in May, and iron ore imports rose 1.1 percent on month to 21.99 million tonnes.
Net nickel imports rose to 6,322 tonnes, up by 3.8 percent in June compared with May. Stainless steel demand boosted China's gross imports of nickel to 48,126 tonnes in the first six months of 2005, up 114 percent from the year-earlier period.
Primary aluminium exports from China in the second half will also be dependent on a long-awaited policy to end the tax-free tolling and processing trade, which would curb resource use by the electricity-intensive industry.
Net aluminium exports slowed in June to 88,526 tonnes, down 23 percent from May as tax changes and lower global prices made sales less profitable.
But exports could spike again in the second half, if the end of the tolling policy is preceded by a grace period as is now expected, a Beijing-based official with a Chinese firm said.