China's Record Iron Ore Imports Buff Up Recovery Hopes

Iron Ore mining China
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China's imports of iron ore roared to a record high in December and for the full year, while crude imports also climbed, boosting hopes that a recovering economy in the world's top commodities consumer will lift its appetite for imports.

Robust Chinese trade data, which saw December exports trumping expectations to rise 14.1 percent to a seven-month peak, also gave further evidence that a demand recovery was well under way in the world's second-largest economy.

"For energy, agriculture and some bulk commodities, we saw an increase in December imports that is led by an underlying demand recovery," said Sijin Cheng, an analyst at Barclays Commodities Research.

"We see December's numbers as setting the tone for 2013 and that is one of a steady recovery in demand."

(Read More: What's Behind China's Blowout Trade Figures?)

China's economic outlook has improved markedly since the government announced a slew of approvals for railway investments, highway projects and other infrastructure projects in September worth an estimated $160 billion.

Industry participants also hope Beijing will roll out more details of its new urbanisation plan when the new government takes over in March.

Hopes of a demand revival, along with falling inventories of steel and iron ore, have sent mills scrambling for the raw material.

Iron ore imports by China, the world's top steel producer, surged to 70.94 million tonnes in December, up 7.8 percent from the previous month, official customs data showed.

Total iron ore imports for 2012 hit a record of 743.6 million tons, rising 8.4 percent from a year earlier.

The jump in Chinese demand has helped drive up iron ore prices by a quarter in December alone, with spot prices touching a 15-month high of near $160 a ton this week. Prices have also spiked 80 percent since September, when ore prices hit a three-year low.

"The fall in iron ore prices during the third quarter certainly resulted in a return of the Chinese buyers to the market. I think it's very opportunistic in terms of the price action, and also partly reflects greater confidence in the Chinese economy, given improving data," said Nick Trevethan, senior commodity strategist at Australia and New Zealand Bank.

"We might see some strength continuing into January as well, but not at the same tempo as in December."

By the end of December inventories of iron ore at ports had fallen to about 73 million tons, the lowest level since January 2011, versus about 90 million tons for most of 2012, data from industry website Mysteel showed.

(Read More: What's Booming? China's Demand for Iron Ore)

Separately, China imported a record 58.38 million tons of soybeans in 2012, up 11.2 percent from the previous year, as growing demand for livestock products supported imports into the world's largest buyer of the oilseed.

Imports in December were 5.89 million tons, the second-highest monthly total after June 2010, as crushers stepped up imports ahead of the Lunar New Year holiday in February, figures from the General Administration of Customs showed.

Crude Oil, Base Metals

China imported 5.57 million barrels per day of crude oil in December, up 8.0 percent from a year earlier, as new refining capacity came on stream over the final quarter of 2012.

China, the world's largest crude oil buyer after the United States, imported 23.67 million tons of crude oil last month, up 1.3 percent from November.

However, the figure slipped 2.1 percent on a daily basis, affected by seasonal destocking.

For the whole of 2012, imports rose 6.8 percent from 2011 to 271.02 million tons, or 5.42 million bpd. In 2011, imports grew 6.05 percent.

Still, the positive trade numbers were marred by a monthly fall of 6.6 percent in imports of copper, as sluggish demand from end-users and swollen port inventories kept buyers at bay.

China, the world's top copper consumer, received imports of 341,211 tons of anode, refined metal, alloy and semi-finished copper products in December, the second-lowest monthly inflows of 2012 and down from 365,331 tons in the previous month.

However, full-year copper imports rose to 4.65 million tons, reversing a decline of 5.1 percent in 2011, when 4.07 million tons were imported.

(Read More: The Copper Trade With a Golden Track Record)

"A fall in December copper imports was expected, given that Chinese firms tried to hold their money back to help cash flows by the end of the year and did not want to spend," Yang Xiaoguang, analyst at Jinrui Futures said.

While China's consumption of physical copper was gradually recovering, analysts said import demand would only come when there was a significant fall in bonded warehouse stocks, which surged in December to a near record high of more than 1 million tonnes.