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CHINA has shifted from being merely the fastest-growing consumer

Aug 10th 2015 at 7:16 PM


Last month China smashed new import records for copper, aluminium, zinc, nickel and iron ore, in each case beating the previous record set in March.The buying spree provides new evidence that China's touted V-shaped recovery may be under way.The surge in imports - when the rest of the world is shutting down - has caused analysts to dust off the thesis that the Chinese economy can grow strongly without help from the United States.But mixed Chinese data yesterday raised questions about how much of the Chinese buying was sustainable.

Growth in industrial production fell to 7.3 per cent in the year to April, from 8.3 per cent in the year to March, while electricity production and exports pulled back more sharply.But fixed-asset investment continues to accelerate, vehicle sales were up 37.4 per cent in the year to April, and purchasing managers indices are pointing to strong expansion.Analysts say the divergence between China's surging metals imports and its more modest underlying economic recovery can be explained by stockpiling for speculative, strategic and industry policy reasons.China's copper imports in April were 400,000 tonnes, triple the levels of a year earlier, and the 440,000 tonnes of aluminium exports were treble the record of the previous month.China's copper consumption has accelerated as the Government builds electricity grids as part of its economic stimulus strategy.

But the surge in apparent copper and aluminium demand is also due to China's Strategic Reserve Board, which hoards copper while prices are relatively low and tries to help producers reopen some of the country's 7 million tonnes of idle aluminium production capacity."The SRB is buying aluminium to prop up an industry which is a big employer and it's buying copper because they're going to need it, because they see global supply is going to be tight," said the metals analyst Michael Komesaroff, of Urandaline Resources.This decade China has accounted for all global growth in nickel, zinc and copper consumption, even before this year's record import surge.But the most stunning shift has been in iron ore, by far China's largest import from Australia.

China imported 54.5 million tonnes of iron ore last month, smashing previous records in March and February.At this rate, China is now importing more than five times as much iron ore as the rest of the world combined - up from about half last year.Part of the import surge can be explained by a revival in steel production (despite a collapse in China's steel exports), although factories might also have run ahead of demand.He Fan, professor of international economics at the Chinese Academy of Social Sciences, said: "State-owned steel companies have told me they want to reduce production but the local governments won't let them because if they do the local GDP numbers will look very ugly."


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