SHANGHAI, Sept 8: China’s imports of crude oil, iron ore, copper and soybeans fell in August from July’s record highs, but shipments stayed at elevated levels as manufacturing activity in the world’s second-largest economy gains pace.
Headline trade data showed China’s overall imports and exports in August were stronger than expected and have sustained the upward trend since July, adding to evidence that the world’s top commodity buyer may have avoided a sharp slowdown.
China is showing signs of a steadying economy after growth slowed for nine of the past 10 quarters, with robust production from steel mills, refineries, power plants and smelters helping to boost consumption of raw materials.
‘Imports in August may have slipped from a month ago, but they are still at very high levels, which is a reflection of strong underlying demand as the economy recovers,’ said Zhang Yu, an analyst at Yongan Commodity Futures.
The Customs Administration said on Sunday that exports rose 7.2 percent in August from a year earlier and imports rose 7 percent, leaving the country with a trade surplus of $28.6 billion for the month.
As recently as a month ago, investors had worried China’s economy was slipping into a deeper-than-expected downturn, especially after its money market suffered an unprecedented cash crunch in June.
But policymakers have stepped in with measures to steady the economy, from quicker railway investment and public housing construction to new policies to help smaller companies with financing needs.
OIL
Crude oil imports from China, the world’s largest buyer after the United States, hit a six-month low of 21.43 million tonnes in August, and were down 17.9 percent from July. Average daily imports stood at 5.05 million barrels per day, off July’s record high of 6.15 million bpd.
But imports in August were still up 16.5 percent from a year ago, taking total shipments in the first eight months of the year to 185.61 million tonnes, up 2.9 percent from a year ago.
Traders have attributed the monthly decline to overhauls at several major refineries, including PetroChina’s 120,000-bpd Urumqi refinery in the northwestern region of Xinjiang and its 120,000-bpd Daqing refinery in northeastern Heilongjiang.
IRON ORE
China imported 69.01 million tonnes of iron ore in August, down 5.6 percent from July’s record high of 73.14 million, data from customs showed.
Despite the fall, August arrivals were still the third-highest on record and a gain of 10.5 percent from a year ago.
The strength in imports has been driven by robust Chinese steel production, with daily runs hovering at above 2.1 million tonnes in the first 20 days of August, up from a July average of 2 million.
The rush to replenish inventories had lifted global benchmark iron ore prices <.IO62-CNI=SI> by 6 percent, to a 5-month high of nearly $143 a tonne in August. But with mills now well-stocked, trade sources said prices could stay rangebound at current levels of around $130 a tonne.
‘The next month looks pretty hard to call – it is too early for restocking,’ said Graeme Train, a Shanghai-based analyst at Macquarie Bank.
‘Iron ore supplies are going to increase and I don’t think they (steel mills) will feel any kind of urgency to hold more inventory than they have at the moment. I think they are in a bit of a holding pattern now.’
COPPER
China’s arrivals of anode, refined copper, alloy and semi-finished copper products fell to 387,564 tonnes in August, down 5.6 percent from July’s 14-month high, confounding market expectations of an increase.
‘This is a surprise. Some contracted shipments may have been resold before the metal arrived China,’ Yang Xiaoguang, analyst at Jinrui Futures said. ‘Weak seasonal demand in July and August may also have cut arrivals of term shipments.’
But August shipments was still the second-highest this year and up 8.9 percent from a year ago.
Traders said copper arrivals were likely to stay strong in September but rising inventories at bonded warehouses, along with a recent correction in spot copper premiums in China, may prompt buyers to cut previously booked orders.
SOYBEANS
China, the world’s top buyer of soybean, imported 6.37 million tonnes of the oil seed in August, down 11.5 percent from July’s record of 7.2 million.
Still, August arrivals were the third-highest on record and have jumped 44 percent from a year ago, as domestic crushers boosted imports of cheap South American soy to fatten crushing margins ahead of the holiday season in September and October.
Imports in the first eight months rose 4.4 percent on the year to 41.05 million tonnes, customs data showed, as a fast-growing poultry industry boosts demand for soy meal and planting areas shrink as farmers switch to more profitable crops. (AGENCIES)
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12.NB
Mexican tax reform to avoid sales
tax on food, medicine-officials
MEXICO CITY, Sept 8:
The Mexican government has decided against levying a controversial sales tax on food and medicine as part of a key fiscal reform it will present on Sunday, officials in the ruling Institutional Revolutionary Party, or PRI, said on Saturday.
The government is aiming to boost Mexico’s weak tax revenues by around 4 percentage points of gross domestic product (GDP), and was seriously considering widening the application of value added tax (VAT) to include food and medicines.
This was viewed as a risky measure politically though because of the impact it would have on the poor, who make up roughly half of the population in Latin America’s No. 2 economy.
The economy suffered a surprise contraction in the second quarter, prompting fears higher taxes would drag on an eventual recovery.
Recent street protests over other reforms aiming to open up the oil industry to foreign capital and overhaul a failing education system undertaken by President Enrique Pena Nieto have stirred fears of social unrest in Mexico, prompting a more cautious approach.
Earlier on Saturday, Finance Minister Luis Videgaray briefed some PRI members of Congress on the planned fiscal reform.
Afterwards several PRI officials, speaking on condition of anonymity, told Reuters that the government had decided to opt against levying VAT on food and medicine.
Economists say broadening the application of VAT would be one of the most effective ways of raising tax revenues, and the PRI in March changed its manifesto to end the party’s longstanding ban on imposing the levy on food and medicine.
The government has never said explicitly it would apply VAT to food and medicines but had not ruled it out either. (AGENCIES)
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