China imported significantly less commodities in February

China imported significantly less commodities in February


  • Chinese crude oil imports fell in February by 9% year-on-year
  • US natural gas price closes at 3-month high after stronger than expected inventory reduction
  • Gold price falls during ECB press conference
  • Downward revision of gold price forecast to $1,800 per troy ounce at year-end
  • Chinese copper imports fell in February to 20-month low, aluminium imports at lowest level since records began
  • China imported lowest volume of soybeans in February in two years, USDA estimates in focus

Energy: Brent is trading largely unchanged at $111 per barrel this morning. Following several days of repair work, a pipeline system in the North Sea with a capacity of 90 thousand barrels per day went back into operation yesterday. Prices have also come under pressure as a result of news from consultant firm Oil Movements – apparently, OPEC will be stepping up its oil shipments by 420 thousand barrels per day, i.e. 1.8%, to 23.83 million barrels per day in the four weeks to 23 March. According to Oil Movements, however, this is attributable to increased demand, which should reduce current scepticism about demand trends. Chinese crude oil imports fell in February by 9% year-on-year to 5.42 million barrels per day. Note however that crude oil imports in February 2012 achieved the second-highest level of all time, and that the January and February figures are distorted as a result of the Chinese New Year’s festival. 
The price of US natural gas climbed by 3.2% yesterday to close at a three-month high of $3.58 per mmBtu. This was prompted by a much sharper than expected 146 billion cubic feet inventory reduction, as reported for last week by the US Department of Energy. US natural gas stocks are now 14% below last year’s level, though they are still 15% above the five-year average, which is likely to preclude any further increase in price. 

Precious metals: During the press conference given by ECB President Draghi after the bank’s interest rate meeting yesterday, the gold price came under pressure despite a weaker US dollar, and this morning is trading at below $1,580 per troy ounce. In euro terms, gold shed 1.4% as a result of the currency’s development, and is now riding only just above the €1,200 per troy ounce mark. Despite significantly improved leading indicators, the ECB lowered its economic forecasts yesterday. Nonetheless, our economists do not anticipate any reduction in interest rates, as the abating of the sovereign-debt crisis suggests that the economy is on the mend. They believe the ECB’s forecasts are excessively pessimistic and think it’s likely that the ECB will soon be positively surprised by the economic data. The gold price is currently under pressure from two sides: first, ETF investors are continuing to jettison their gold holdings in grand style. The gold ETFs tracked by Bloomberg have meanwhile seen outflows on fourteen consecutive days of trading – totalling 123 tons since mid-February. Since the beginning of the year, ETF outflows total just shy of 146 tons. In all likelihood, ETF demand will thus contribute negatively to investment demand in this quarter; in recent years, investment demand has played an important part in driving up the gold price. Second, financial investors have retreated significantly from the market in recent weeks, as evidenced by the low levels of speculative net long positions. For as long as these trends continue, the gold price is hardly likely to gain any ground. The positive market environment for gold (e.g. low real interest rates, devaluation race between currencies) continues to point to a rising gold price during the course of the year. We have nonetheless lowered our year’s end forecast to $1,800 per troy ounce. 

Base metals: As anticipated, China imported significantly less copper and aluminium in February. Because of the Chinese New Year’s festivities, which saw economic activities suspended for a week, copper imports fell by 15% month-on-month to 298.1 thousand tons, their lowest level for 20 months. Year-on-year, they were even down by more than 38%. That said, Chinese New Year was celebrated in January last year, so the comparison does not accurately reflect the situation. To obtain a clearer and more readily comparable picture, we recommend looking at the first-quarter averages. A part of the imported copper was probably not used immediately, as a glance at the inventory statistics of the Shanghai Futures Exchange reveals: in its warehouses, copper stocks total a good 225 thousand tons, putting them close to a yearly high. Imports of aluminium fell by a good 34% month-on-month and a good 63% year-on-year to 45.5 thousand tons. For the first time since the data series began in 2001, China has thus imported less than 50 thousand tons of aluminium in one month. Given its own high level of production and considerable stocks – at a good 492 thousand tons, the latter are not far off the record high they achieved in mid-2010 – China does not necessarily need to import aluminium. We expect economic activities to pick up significantly again now, which should be reflected in rising imports and, ultimately, higher metal prices. 

Agriculturals: While prices of wheat and corn fell sharply this week and continue to trade close to multi-month lows despite yesterday’s increases, the soybean price has gained by 2.3% since the beginning of the week. At present, a bushel of soybeans costs $14.8, the same as it did a month ago. Reasons cited for the decoupling of soybean prices are robust demand, delivery problems in South America and the low US stock levels. The latter are likely to be confirmed by the estimates to be released later today by the US Department of Agriculture. By the end of the current crop year, US soybean stocks look set to dwindle to 124 million bushels. In all probability, the stocks-to-use ratio would then drop to 4% and thus to its lowest level since records began 49 years ago. One factor pointing to increased demand is the fact that China, the largest importer of soybeans, bought considerably less in February and will thus need to replenish its stocks. According to the Chinese customs authorities, soybean imports into China last month totalled a mere 2.9 million tons – this is nearly 40% lower than in January and 24% below the year-on-year figure. It was also the lowest monthly import volume for two years. Besides the Chinese New Year celebrations, lower seasonal demand and low processing margins were no doubt responsible for the sharp decline in imports.