China: Imports Surge Doesn’t Suggest An Economy That’s Tanking

Behind China's surprise $US31 billion trade surplus was a surge in demand for key commodities from Chinese industry, a development that will upset plenty of preconceived notions about the strength of Chinese industry and demand.

There are plenty of bears who see the news of a sharp rise in imports as being somehow bad news, a sign that Chinese industry is weak and the economy soft.

There are others who will greet the news with the knowledge that if this high level of demand for commodities and other products continues, it will further reduce China's huge trade surpluses and ease pressure from the point scoring publicity mad politicians in the US and Europe

(Try France where China and its trade surpluses and globalisation are now an issue in the Presidential poll).

Imports of oil, copper and iron ore jumped in February to near record or record levels.

The leap day on February 29 had a small part in the surge in imports, but the main reasons were stock rebuilding after the holiday slow down in January and the fact that February last year was when the Lunar New Year slowdown occurred.

But the size of the rebound for many commodities undermines again the claims by bears that China's slowing economy will be bad news for commodity suppliers.

Production might be slower than a year ago in China, but demand remains solid.

For example, imports of iron ore soared 34% (from February 2011) to a near record 64.98 million tonnes, the second highest on record.

February iron ore imports were also 10% above January's 59.3 million tonnes, which were down 7% from December and down 13.9% from January 2011.

Analysts said steady spot prices for iron ore (around $US140 to $US144 a tonne) in January and February helped steelmakers boost imports.

In fact January's iron ore imports were above the monthly average for 2011, despite the fall from December's level.

February's level was considerably above the average for last year.

Another clue that steel demand and production were stronger than expected was a 25% jump in output of local iron ore mines to just over 82 million tonnes.

Crude steel production hasn't fallen in a heap, as some commentators (and parts of the Chinese steel industry) would have us believe.

China's crude steel output in February rose 3.3% from a year earlier to 55.88 million tonnes.

In the first two months of this year, the country produced 112.62 million tonnes of steel, up 2.2% from a year ago.

This means crude steel output in January alone was 56.73 million tonnes.

That's 8% above the industry estimate of 52.1 million tonnes, but it also means steel production in February was down on January, even with an extra day's production because of the leap day on February 29.

An accurate figure from the Bureau for January was not given because the Lunar New Year break interrupted its data release schedule.

China's copper imports exploded in February, jumping 17% from January to 484,569 tonnes, and double the level of February 2011.

Granted the timing of the holidays in 2011 and 2012 makes the rise look bigger than it probably was, but the analysts said the buying was much stronger than that and had suggestions of stockpiling by metal processors.

Oil imports hit a daily record of 5.95 million barrels, up 18.5% and well above the previous record of 5.67 million tonnes set last September.

A combination of refineries out of maintenance and fears about the Iranian situation cutting supplies forced Chinese companies to splurge on oil as world prices firmed.

Soybean imports fell in February from January, but were up sharply from a year earlier.

The Customers data showed 3.83 million tonnes of beans were imported last month, 17% down from January, but up 65% from a year ago.

Imports of natural rubber rose 36% year on year to 150,000 tonnes last month.