Oil hits record on higher than expected China imports in February

Beijing: China’s imports of main commodities posted a surprise rise in February versus January, despite a shorter month, with crude oil hitting a daily record, soothing market worries that a slowing economy has yet to cut into use of commodities.

Imports of copper, of which China is the world’s largest buyer, climbed to 484,569 tonnes, 17 percent more than January and double the year-earlier level, according to data the General Administration of Customs posted on its website on Saturday.

“That’s a surprise. We may have underestimated investors’ appetites,” said Fu Bin, analyst at Jinrui Futures, a subsidiary of top copper producer Jiangxi Copper.

Fu was referring to investors who import copper and resell the metal domestically to obtain cash for financing other investments, while China maintains a tight credit policy.

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Some analysts had expected copper imports to be capped as domestic prices were below the cost of imports, though others have argued China may need to build up stocks ahead of the expected seasonal demand rise from March to May.

Imports of crude oil, of which China is the world’s No.2 buyer, hit a daily record of about 5.95 million barrels, an 18.5 percent rally over a year earlier. The previous daily high was set in September 2010 at 5.67 million bpd.

The peak imports contrast with the earlier market view that maintenance work at oil plants, and top oil refiner Sinopec Corp’s (0386.HK) reductions in Iranian oil imports in the first few months this year, could cut into purchases.

“In view of potential supply disruptions surrounding the Iran nuclear issue, oil firms may have raised imports beyond the requirement by refineries to bolster the stocks and provide a cushion for future uncertainty,” said a Beijing-based oil analyst.

Iron ore imports also rose 9.5 percent last month to nearly 65 million tonnes versus January, one-third higher than February 2011.

The surge in shipments over February was mostly a result of a faster than predicted recovery in steel output over the month. Daily crude steel runs rose to 1.93 million tonnes, up from 1.83 million tonnes in January and 1.68 million tonnes in December.

The higher ore imports may have bolstered domestic stocks as local ore miners also lifted production sharply in February, by a quarter versus last year at 81.57 million tonnes, data from the National Bureau of Statistics showed on Friday.

Economic data released on Friday – a 20-month low CPI, plus factory output and retail sales cooling more than forecast – reinforced expectations that Beijing will focus on growth rather than inflation this year, and steer the economy away from a sharp slowdown.

Soybeans were among the few items that posted a month-on-month fall in imports, with shipments down 17 percent versus January at 3.83 million tonnes. Still, compared to a year earlier, imports rose 65 percent.

The cutback from January was much anticipated due to negative margins for importers as high domestic inventories kept local prices below import costs.

Reuters