Commodity Online
Barclays expects zinc import demand of China 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, the Bank said in a recent report.

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, Barclays expects 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.

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." the Bank said. 

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 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.” Barclays said.

In agricultural commodity markets, imports continued to be volatile on a month-on-month 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 Barclays expects 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.