Rising shipments of coal, crude oil raise market hopes.

China is set to become the world's largest consumer of platinum this year.

G. Chandrashekhar

Mumbai, Dec. 28

With its voracious appetite for a whole range of commodities including energy products, base metals and precious metals, as well as agriculture, China continues to amaze the global commodity market participants.

In no small measure has the Asian major's import demand for a wide variety of commodities to meet its internal consumption requirement been a key driver of the remarkable recovery the markets have witnessed in recent months.

Latest data confirm the dominant role China plays in the marketplace.

No doubt, there have been concerns expressed from time to time about the possibility of China importing excessively, which may result in slowdown that could affect prices adversely.

However, consumption as reflected in macro-economic data and expanding domestic output suggest that domestic demand continues to strengthen despite brief periods of weakness and doubt.

This raises the expectation that China's import and consumption demand for a wide range of commodities would continue to expand or in any case remain strong in 2010. When taken together with wide spread anticipation of demand recovery emerging in major OECD economies, the China story assumes greater significance for commodity producers and consumers.

Net imports

Latest available trade data (for November 2009) paint a positive picture of Chinese demand. After a dip in October, net imports of aluminium, copper, nickel and tin rose last month and remain a long way ahead of last year's levels.

Among energy products, crude imports, although slower than in October, were close to 30 per cent higher year-on-year. Coal imports continued to expand.

Precious metals

In precious metals, imports of platinum hit an all-time high, while palladium and silver imports on both monthly and yearly comparisons have continued to rise.

According to Johnson Matthey, China is set to become the world's largest consumer of platinum this year.

Palladium imports have been rising last seven months. The precious metal is used in auto-catalyst and auto sales are booming.

Vehicle sales hit a new record inn November, rising by 95 per cent year-on-year to 1.34 million, the ninth consecutive month of sales of over one million, well supported by government's incentive schemes, analysts pointed out.

Meanwhile, silver imports rose 16 per cent year-on-year to 470 tonnes, while exports fell 27 per cent year-on-year to 298 tonnes.

This keeps China's status as net importer of silver for the second successive month. Net imports so far this year total 821 tonnes.

Soyabean

In agricultural markets, soyabean imports rebounded from October lows and China remained a net importer of corn for the third month in a row. According to analysts, China's recent macro-economic data suggest that the underlying drivers of commodity consumption are healthy. Power generation has been rising for the last six months. Industrial production is rising at its fastest since mid-2007.

No wonder, Chinese data augur well for commodity producers and exporters. As New Year and new decade dawns, China has successfully raised market expectations.

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(This article was published in the Business Line print edition dated December 29, 2009)
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