The reaction of commodities to the Chinese trade data show that sentiment and fundamentals are diverging, with the fear trade winning so far.

No matter which way you try and slice and dice it, China's imports of commodities in the first two months of the year have been surprisingly strong.

But the market has chosen rather to focus on the February slide in merchandise exports from the world's second-biggest economy, concluding that all isn't well and therefore commodity imports will tumble in the coming months.

Add to this the view that much of the strength in imports of copper and iron ore was related to accessing financing rather than underlying demand, and suddenly you can turn large gains in imports into something negative for future demand.

The issue is whether the market is reading it correctly and the outlook for Chinese commodity demand is weak, or whether a more modest pullback in import growth is likely in the months ahead.

Much will depend on the state of the overall economy, and here the risk is that the 18.1 percent drop in exports in February from a year earlier is a harbinger of bad economic news.

While the Lunar New Year, which started in late January but was mostly in early February, shouldered much of the blame for the disappointing export numbers, it's worth noting that exports for the first two month of 2014 were still 1.6 percent below that for the same period last year.

This does fit with recent softness in both the HSBC and official Purchasing Managers' Indexes, but so far the economic numbers are far from catastrophic.

The export numbers also showed a rise of 1.3 percent in the value of shipments to the United States and a gain of 4.6 percent for the European Union in the first two months of the year, indicating recovery in demand from the developed economies.

What does this mean for commodity import growth in the next few months?

Taking metals first, and iron ore imports were 63.16 million tonnes in February, up 11.9 percent from the same month last year, but down 37.5 percent on January's record high.

Taking the first two months together, iron ore imports were up 21.8 percent over the same period last year.

The concern is that iron ore has joined copper in being used for financing, and that this type of demand is unsustainable. It will also result in a build-up of inventories, and given steel demand isn't roaring ahead, the fear is that imports will plunge in coming months.

However, steel output rose to 2.08 million tonnes in the last eight days of February, a 5.9 percent rise over the prior 10-day period.

Steel inventories also shrank by 5.9 percent, although they remain near record highs.

While the outlook for steel demand growth in 2014 remains uncertain, with the consensus for a modest increase, there still doesn't seem enough in the recent data to justify the massive 10.4 percent slump in Asian spot iron ore prices in the past two trading sessions.

IRON ORE PLUNGE OVERDONE?

Iron ore is down 22 percent so far this year, and at $104.7 a tonne on March 10 is the lowest in nearly 18 months.

Since the 2008 global financial crisis, large declines in the price of iron ore have usually been followed by higher Chinese imports of the steel-making ingredient, as buyers take advantage of cheaper prices but also as high-cost domestic producers are forced to cut output.

Turning to crude oil, imports were 6.01 million barrels per day (bpd) in February, up 11 percent from the same month in 2013, but down from the record 6.63 million bpd in January.

Imports averaged 6.36 million bpd in the first two months of this year, up a strong 11.5 percent on the same period last year, again hardly a sign of an economy about to hit the wall.

Crude imports have been boosted by the start-up of two new refineries with a combined capacity of 440,000 bpd, as well as some rebuilding of commercial inventories.

But it also is likely underlying demand hasn't been as soft as feared, given the new refining capacity has yet to result in increased exports of fuels, with outbound product shipments actually dropping 7.7 percent in the first two months of the year compared to the same period in 2013.

The plunge in exports in February was certainly the headline news from China's trade data, but it doesn't tell the whole story.

The Chinese government remains committed to achieving economic growth of 7.5 percent in 2014, although it's more flexible on the target than in past years.

With developed world economies also starting to show signs of sustainable economic recovery, it may be premature to bet that China's growth in commodity imports this year will slow as dramatically as suggested by the plummeting iron ore price.