China's February crude oil and copper imports eased from record highs witnessed in January. Barclays said that while imports usually pull back during the holiday month, worsening import losses likely dented financing demand for commodities. The stock overhang could weight on prices in the short run, Barclays added.
Crude imports eased 9% m/m to 6.03 mb/d in February (up 11% y/y). Imports in the first two months of 2014 averaged 6.34 mb/d, 11.5% higher than the same period last year. Supporting imports was the startup of two new refineries (Sichuan and Quanzhou) in January, with a combined capacity of 440 kb/d. But refiners also built stocks; commercial crude inventories were up 3.6% m/m by the end of January.
-Product imports dropped more sharply to 610 kb/d, down 28% y/y. Combined imports in the first two months averaged 740 kb/d, down 16% y/y. Exports, on the other hand, were flat m/m at 540 kb/d, and China exported 7.7% less products in the first two months compared with same period of 2013. Refiners likely continued to tap the export market for a small surplus in products, especially diesel, whereas fuel oil imports were muted during the holidays.
-Net crude and product imports fell 13% m/m to 6.03 mb/d (up 7% y/y). Lower net product imports dragged down total oil inflows. China’s implied oil demand may have improved, as the planning ministry revealed in its flash report that runs were 2.6% higher y/y in January, which would be the first positive reading since October 2013 if it is confirmed in official figures released next week. However, product stocks have also built, which suggests that demand remained seasonally soft.
-Unwrought copper and semi imports plunged 29% m/m to 380Kt in February, but still 27% higher than last year’s low base. China imported a total of 915Kt of unwrought copper and semis in the first two months of the year, 267Kt higher than the same period last year. Massive imports in January were driven by financing demand, a result of tight credit conditions at end-2013. As Shanghai prices lagged behind LME prices, however, losses mounted, and the sudden depreciation of the CNY this month has further dented financing appetite. But we think imports could still hover above H1 13’s levels in the next month or two, as Chinese buyers likely booked more term imports this year and financing demand is still alive, just weaker.
-Unwrought aluminium and semi imports slid 13% m/m to 95Kt, still double last year’s levels. Import arb has also been negative since February, and financing appetite was likely affected as well. Imports are likely to remain muted if arb stays closed and the domestic market is flush with aluminium supply.