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WRAPUP 1-China commodity imports sapped by high prices, tight

Published 04/21/2011, 08:46 AM
Updated 04/21/2011, 08:48 AM

* Implied oil demand up 10.9 percent, slows from Feb

* Refined copper imports fall 43 percent on year

* Coal imports fall 40.1 percent on year

(Wraps coal, copper, rare earths and other commodity trade)

By Fayen Wong

SHANGHAI, April 21 (Reuters) - China's imports of many commodities failed to rebound convincingly in March as strong international prices deterred buyers and spurred local production, while Beijing's aggressive monetary tightening cast a pall over the outlook for the second quarter.

Imports of copper and coal, which have feasted on strong Chinese demand for the past two years, both fell by around 40 percent from a year ago.

Volumes were higher than in February, but that was a shorter month with a week-long holiday.

Imports of crude oil, iron ore, and nickel all rose slightly from a year ago but the monthly tonnage was still far below January's levels.

Imports of refined copper, a bellwether of Chinese manufacturing zeal, regained 21.5 percent from February but still reached only 192,161 tonnes.

Any hope of Chinese demand reviving was badly dented by a bulge in exports, surplus metal from China's own record production of 470,000 tonnes during the month.

The amount of refined copper leaving China in March totalled 36,768 tonnes, nearly as much as in the whole of 2010 -- but valued at $355.5 million, up 17 percent.

"Copper's performance was quite poor and I think the record-high domestic production played a big factor in limiting imports," said Judy Zhu, a commodities analyst at Standard Chartered Bank in Shanghai.

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"Overall, we think the demand growth for commodities will continue to slow on the back of the government's monetary tightening measures," Zhu said.

China, the world's largest consumer of coal, copper and iron ore, has raised interest rates four times since October and upped banks reserve requirements seven times to a record high of 20.5 percent in an all-out attempt to battle inflation.

The Central Bank's moves have drained cash from the market and sapped end-users' buying power, with smelters, steel producers and trading houses struggling to secure loans and smaller firms said to be experiencing cash-flow problems.

The full impact of China's credit tightening may not have fully flowed through its economy and the country's growth as well as commodities demand may show a bigger slowdown in the second quarter, some analysts have said.

RARE EARTHS, NORTH KOREA

China's apparent oil demand rose 10.9 percent in March from a year earlier but fell 4.0 percent from February as refiners produced less fuel and net imports fell.

The data may add to a growing chorus of warnings that high oil prices were beginning to hurt global demand, with the International Energy Agency saying demand in top consumers China and United States has already slowed.

Coal imports in March rebounded to 9.05 million tonnes from a 14-month slump of just 6.76 million tonnes in February, with Indonesia, Mongolia and Vietnam the top three suppliers.

Despite the rebound, the import volume was still near a low posted in May 2009 and was substantially lower than the monthly average of 13.7 million tonnes over the whole of 2010, adding to analysts' concerns that China's demand for imported coal may defy expectations and fall this year.

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"Coal imports will be subdued this year. Although domestic prices have increased, the gains still lag the increase in international prices," said Helen Lau, an analyst with UOB-Kay Hian in Hong Kong, who sees China's 2011 coal imports falling 25 percent this year to 120 million tonnes.

High prices pushed Australia into fifth place among China's coal suppliers in March, behind North Korea. Meanwhile Chinese exports leapt to 2.6 million tonnes, largely thanks to a 1.4 million tonne sale to quake-hit Japan, more than double the volume of trade a year previously.

Exports of rare earth metals, a much smaller but lucrative Chinese product, resumed in March after two months in the doldrums, but remained a third lower than in March 2010.

Japan took 1,237 tonnes of the total 2,081 tonnes exported, while the value of exports continued to soar, reaching $119,080 per tonne, up almost tenfold from a year earlier.

China's iron ore imports rose one percent from a year earlier to 59.5 million tonnes, but high stockpiles, uncertain steel demand and monetary tightening all add to near-term uncertainty. (Writing by Fayen Wong and Tom Miles; editing by Jason Neely)

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