December proved a mixed month for China’s commodity imports. Imports of some
important agricultural commodities like corn and wheat fell quite sharply, whilst refined
copper imports continued to trend steadily lower, but crude oil imports maintained
their Q4 surge. These differing patterns show that, as China’s importance in
commodities markets grows, its impact is becoming more diverse with relative prices
and differences in stocking cycles becoming as important, if not more so, than the
underlying economic growth trend. As China’s recovery takes root, the impact is likely
to be felt to very different degrees in its import demand for different commodities.
Many of the trends evident in the Q4 data are ones we expect to persist into 2013. In
industrial metals, demand for intermediate and raw materials like alumina and base
metals concentrates continues to grow much faster than imports of metal. Although
imports of alumina may slow this year, we expect import demand for copper
concentrate and nickel ores to continue growing at the expense of metal demand as
more metal is produced by domestic processors. The flipside of this is that demand for
metals imports in many sectors could be flat to down and the weakness in China’s
copper imports in particular is likely to persist. In contrast, we expect zinc import
demand to remain strong since, after a recent clamp down on copper financing, zinc
now appears to be the metal of choice for this type of business.
In oil markets the strength of Q4 demand partly reflects the start-up of new refining
capacity and a surge in product exports as well as better domestic demand for gasoline
and diesel, plus lower fuel oil imports to feed small local refiners. We expect all these
issues to be important in 2013 and, although the recent pace of y/y growth in oil
demand of almost 800kbpd will not be maintained, we still forecast a sizeable increase
in demand growth from 330kbpd in 2012 to 460kpb in 2013.
In agricultural commodity markets, imports continued to be volatile on a month-onmonth
basis especially for corn which fell by a third in December. However, that
volatility is taking place around a strongly increasing trend. 2012 marked a record for
corn and soybeans imports and an 8-year high for wheat. However, whilst we expect
soybean imports to continue setting fresh highs, that is less likely in corn where a very
big expansion in domestic supply raises the risk of a decline in China’s corn import
demand in 2013.