The pace of growth in China's passenger vehicles market has slowed after sales growth in March eased.

That's another much watched indicator of activity in the Chinese economy that has produced an outcome for March that had both strong and weak points.

Just like the inflation and trade account details on Monday and Tuesday, the car sales data suggests that Chinese car buyers are still interested in buying vehicles, but at nowhere near the madcap rate of 2009-10.

The data suggests that demand for steel remains strong (but not as strong as a year ago), a view confirmed by the iron ore import data for March.

A total of 3.53 million cars, sports-utility vehicles, multi-purpose vehicles and minivans were sold in the country in the three months to March, up just 0.3% from the first quarter of 2011.

Sales in March rose 2.6% to 1.27 million units, after the fluctuating pattern of January and February.

January saw a fall in sales of 16.5% in February, a 22% surge in sales thanks to Lunar Festival holiday being in January of this year, against February in 2011.

Chinese car makers say the industry is still on track to lift sales this year by 7% to a massive 19.8 million units in 2012, 15.55 million of which will be passenger vehicles.

With the central government ending subsidies meant to stimulate vehicle purchases last year, vehicle sales in the country slowed from the rapid growth rate of 2009 and 2010.

The slowing economy and the increasing cost of raw materials and of higher fuel prices (a price rise happened in China last month) will make the rest of the year tougher for car companies, domestic and foreign.

Compared with China, the US sold more cars last month (1.4 million) than China did. In fact the US market grew 13% in the first quarter of 2012 from a year earlier.

China's March sales, as stated above, were up 2.67%.

The car industry is a major user of steel, so it is a mildly bullish point that sales saw a small rise in the month and the quarter.

But clearly the tighter monetary policy aimed at controlling inflation, and especially property price inflation, is having an impact on the whole economy.

Figures out yesterday confirm that China's iron ore imports fell 3.2% from February, but were still a solid 5% or more above the March figure last year.

Imports amounted to 62.87 million tonnes last month, compared with 64.98 million tonnes in February and 59.48 million tonnes in March last year.

Imports in January were around 54 million tonnes and cut by the long holiday, while the February figure was boosted by restocking. March's imports were maintained above the 60 million tonne level which is now seen as the dividing line between solid demand and a weak to falling appetite for the key steel making mineral.

Traders said imports would have been higher but for a 27% fall in Brazilian iron ore imports.

Still total iron ore imports for the March quarter were up 6% at 190 million tonnes, but that was cut by the 27% fall in Brazilian imports and a 9% drop in shipments from Australia. Those declines were driven by wet weather in Brazil (for a second March quarter) and by cyclones in WA (for the second year as well).

The spot price for 62% Fe (iron oxide) China's Tianjin Port, the industry benchmark, is around $US147.6 a tonne as of April 5, up nearly 7% for the year so far.

China's steel exports in March totalled 5.03 million tonnes and were up 16% in the quarter to more than 12 million tonnes.

Copyright Australasian Investment Review.
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