Saturday, October 14, 2017 3:22:13 AM
in Dry Bulk Market,Freight News 14/10/2017
China’s factories splurged on imported commodities last month amid rising costs and tighter supplies of raw materials in the world’s second-largest economy driven by Beijing’s anti-pollution campaign.
But the strength in import demand is unlikely to be sustained in the months ahead as many of these companies curb production during winter in line with China’s bid for clean air.
Steel mills and traders brought in record volume of iron ore, coal arrivals hit their highest in nearly three years, gas shipments shot to nine-month peaks, and imports of copper metal as well as concentrates and ores were the most since March.
The commodities buying spree helped spur a better-than-expected 18.7-percent surge in China’s total imports, customs data showed on Friday.
The data comes as many manufacturers scrambled to churn out as much product as possible before November, when government orders to slash operating levels during the winter kick in.
With prices soaring at home, manufacturers have had to import to secure ready and cheaper supplies. Thermal coal prices are up nearly 50 percent this year, hitting a record high above 600 yuan ($91) per tonne last month and largely holding on to the price gains.
That highlights Beijing’s challenge as the government steps up efforts to tackle China’s notoriously toxic air and pursue its years-long push to streamline bloated industries, while it also tries to ensure those measures don’t squeeze supplies and lift prices of key raw materials.
“The capacity cuts and environmental inspections in China have pushed domestic commodities prices up,” said Xu Bo, coal, steel and iron ore analyst at Haitong Futures.
“However, prices have soared too fast and too much. Downstream consumers cannot bear the new prices and were forced to turn to foreign markets to seek alternatives.”
This summer, the government ramped up smog checks and forced many factories to close or suspend operations across the country, boosting prices of everything from soymeal to ferroalloys.
Beijing has also ordered heavy industry, including steel mills and aluminium smelters, in 28 cities to cut output for four months from November in a bid for clear skies as people crank up the heat, drawing on the nation’s favourite fuel, coal.
“A lack of build in stockpiles suggests strong underlying demand, rather than restocking, was the main driver behind these numbers,” ANZ analysts said in a note, on the import numbers.
But with winter cuts kicking in next month, the outlook looks bleak. Some commodity prices, like iron ore, have come off recent highs on expectations of slower winter demand.
One standout in the coming months may be natural gas as China prepares to heat millions of homes with the cleaner-burning fuel for the first time, stoking import demand for liquefied natural gas.
Source: Reuters (Reporting by Josephine Mason and Muyu Xu; Additional reporting by Elias Glenn; Editing by Manolo Serapio Jr.)
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