According to one view, China's import data in May was fairly benign; according to other views, it's a signal of a gathering slowdown.

Chinese crude oil imports were eased slightly to 5.10 millions barrels a day from 5.26 millions b/d in April.

Since the beginning of this year, petroleum imports are in a range from 5.1 to 5.3 millions b/d.

For the other main commodity imports iron ore was stable, though down on the end of last year.

The contraction is sharp both on annual (copper: 36%; rubber: -18%; aluminium: -15%) and a monthly basis.

But metal imports such as copper and aluminium seem to have also been linked to rather exotic financing methods for property and other loans that have now been knocked on the head by the authorities, leading to a sharp fall in the amount of copper imported (and a fall in copper held in warehouses, according to some media reports, as it is re-exported).

But there's another way of looking at the oil import story.

In tonnage terms, China brought in 21.55 million tonnes of crude oil last month, all but steady on the 21.54 million tonnes imported in April.

The volume was up 20.7% from a year earlier, in part due to a low base in May 2010.

On a daily basis, the imports in May were equivalent to 5.1 million bpd, and topped the 5 million mark for the fifth month in a row.

That's a sign of an economy not roaring ahead, but not slumping either.

Imports will still account for between 52% and 55% of total Chinese consumption (we will get the precise figure when the domestic production data is released later today).

Imports of oil products rose 5.3% from a month earlier to 3.39 million tonnes in May while exports of oil products rose 20% to 2.46 million tonnes, resulting in net fuel imports of 930,000 tonnes, the lowest since November.

China has banned exports of diesel to help maintain adequate domestic supplies of the fuel for an expected rise in demand during the power blackouts expected this summer. So the exports of oil products are obviously things like petrol, jet fuel and petrochemicals.

That's aimed at trying to control domestic oil, petrol and diesel prices which have been allowed to rise more slowly than world prices.

But with the fall in world prices since early May, Chinese domestic prices would appear to be about right for the moment.

China's iron ore imports rose 0.8% to 53.3 million tonnes in May from April.

China's imports of iron ore dipped 11% month-on-month in April, reflecting the impact of high prices in early March. Imports fell to 52.88 million tonnes in April, 4.4% lower than a year ago.

For the first five months of the year, China's iron ore imports were up 8.1% to 283.5 million tonnes, which is still solid.

May's volume was 2.7% up from May 2010, although the total cost of iron ore imports rose by a third to $US8.9 billion (helping BHP, Rio and Vale of Brazil).

So for the rest of the year iron ore demand might be a bit weaker than expected, but then again the contract prices for the September quarter are currently being discussed so a lot of the analysis from China should be viewed in that light: deliberately painting an outlook weaker than reality (such as Baosteel warning that it will start cutting the prices of some steel products next quarter).

Trading house sources say imports are expected to fall this month for seasonal reasons, with steelmakers reducing their forward orders as demand for steel falls away from June through August.

A complicating factor is the extent to which Chinese steel mills will be affected by the power rationing mainly from June to September, although the impact to production may not be easily assessed.

China exported 4.76 million tonnes of finished steel products in May, down just 0.2% from April, taking total Jan-May exports to 20.04 million tonnes, up 11.6% from the same period of 2010.

And its steel product imports in May dropped 6.6% to 1.28 million tonnes from April, and the accumulative January-May imports was 6.83 million tonnes, down 1.9% from the same period of last year.

China's copper imports fell for a second month in May, dropping to 254,738 tonnes partly on lower demand for metal to back financing deals. That's down 36% on a year earlier.

But the demand for copper wasn't all gloom, as scrap imports remain high.

Copper scrap is a cheaper alternative for smelters and fabricators, and imports rose 5.3% on the month to 400,000 tonnes, up 21.2% from May 2010.

That's a positive to me.

China's imports of scrap aluminium slipped by 5.6% in May after shipments peaked at the 2011 high in April, with tonnages set to drop further in coming months due to falling downstream demand and power shortages.

And finally a surprise in the figures: soaring coal imports, responding to tightening domestic supplies and rising prices.

May's import data showed that China imported 13.4 million tonnes in the month (up 20% on April) and 56.88 million tonnes for the first five months.

Exports fell sharply and are now at the lowest they have been four years, according to a report on Reuters quoting the ANZ Bank.

"The rise of domestic prices and the emergency need from coal-fired power plants have discouraged exports.

"One of the policy responses to the ongoing power shortage is to increase coal inventory," ANZ analysts said in a research note.

Reuters said coal imports for June are poised to rise further and could top 16 million tonnes, according to some trade estimates, as domestic prices soared to a 2-1/2 year high and power plants boosted run rates to cope with peak summer demand that will stretch on until August.

Copyright Australasian Investment Review.
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