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China’s crude oil imports in October came in at 5.6 mb/d, up 13.8% y/y; implied oil demand was up 7% y/y while YTD demand is now higher by 3% y/y. While Barclays expects a recovery in China’s oil demand gr..

22 Nov 2012

Commodity Online
When it comes to precious metals appetite of China , the weakness in imports signalled in September continued in October with silver imports down y/y for the 25th straight month; palladium imports for the fifth consecutive month and platinum imports for a second month.

China’s crude oil imports in October came in at 5.6 mb/d, up 13.8% y/y; implied oil demand was up 7% y/y while YTD demand is now higher by 3% y/y. While Barclays expects a recovery in China’s oil demand growth, the pace is likely to be modest over Q4, a report from the Bank said.

This is after factoring in the underlying demand trends for key products as well as Barclays' economists view of a stabilisation in GDP growth rather than a pronounced recovery.

China's refinery appetite for crude oil in H2 so far has outperformed H1 in terms of growth but this was partially due to a series of retail fuel price hikes that helped boost refinery margins in September and October.

With retail fuel prices cut again in November, margins are under pressure again, and one could see the gains in refinery runs moderating going into Q4, especially with underlying product demand not being exceptionally strong.

China’s October macro data were slightly better than consensus. Industrial production growth rose to 9.6% y/y from 9.2% in September while YTD fixed asset investment growth continued to recover, picking up to 20.7% y/y. Nominal retail sales growth rose to 14.5% y/y with robust consumer sentiment supporting our economists’ belief that the rebalancing of the Chinese economy is underway.

Moving to metals, China’s primary aluminium imports were up four-fold from last year due to an open arb and, with exports falling to 4Kt, China was a net importer of 45Kt, adding to an oversupplied domestic market. Copper cathode imports fell to 231Kt in October, their lowest level of 2012.

The fall from an average of 298Kt of imports so far this year reflected still-weak demand and a pickup in domestic copper production, as NBS data showed domestic output rose 9% y/y in October, spurred by rising TC/RCs.

Unfavourable import arb for most of September and high financing costs also likely contributed.

Finally, import appetite for agricultural commodities was mixed. Soybean, soy oil, sugar and wheat imports eased m/m while imports of cocoa, coffee, corn, cotton and palm oil rose. We don’t expect the rise in cotton imports to endure and anticipate further weakness in sugar imports.


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