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The September Chinese trade data, combined with improving evidence from the macro front for October (a rebound in PMI and expansionary indications in the manufacturing sector), are in line with Barclays' soft landing ..

25 Oct 2011

LONDON(Commodity Online): The September Chinese trade data, combined with improving evidence from the macro front for October (a rebound in PMI and expansionary indications in the manufacturing sector), are in line with Barclays' soft landing assumptions, as the bank continues to grow more positive on the outlook for China’s commodity import demand over the remainder of the year.

The report from Barclays paints an encouraging picture of China and eschews fears of a hard landing by the economy.

In base metals, Chinese import levels for copper, nickel and tin rose to their highest respective levels in over at least a year, demonstrating well the transition from the predominant trend of de-stocking earlier in 2011 to now one in which imports are necessary to meet domestic demand needs.

Moreover, positive trends in domestic price differentials versus the LME continue to indicate that these import levels are well supported by robust domestic market tightness, irrespective of concerns over export weakness.

The tightness in raw material markets, particularly though not exclusively for copper in concentrate and scrap form, also appears to be constraining domestic production growth and lending itself to higher refined import demand.

The September trade data for precious metals were mixed with a continued recovery in PGM imports and a sustained decline in silver appetite. Palladium imports remain healthy and given that our auto analysts continue to expect production to grow next year, this bodes well for palladium, in view of the implied low level of palladium stocks.

In the energy markets, though overall demand for oil was on the softer side, a lot of the softness was to do with considerable destocking rather than weakness in underlying demand. In terms of oil products, gasoline and jet fuel demand came in at a record high while diesel demand remained well-supported. Coal imports for September rose to record highs as hydro generation performed poorly and Chinese buyers stocked up ahead of the anticipated Daqin line maintenance.

For agricultural commodities, customs trade data for September were positive on the whole, with strength in cotton, wheat, sugar and corn imports.

As prospects for the Chinese economy get shrouded in uncertainty, China’s appetite for commodities has increasingly grabbed attention. It is in this context that market participants welcome a mixed set of commodity trade data, helping to reaffirm hopes for a soft landing for the economy.

Most of the commodity demand numbers traced macro economic indicators over the month and were largely in line with expectations, the bank said.


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