China's imports of crude oil and iron are expected to rise in November as refineries raise runs and steel mills restock, but an uncertain economic outlook continues to hold back purchases of a range of commodities.
The pace of activity in China's vast manufacturing sector quickened for the first time in 13 months in November, a survey of private factory managers found, adding to evidence that the economy is reviving after seven quarters of slowing growth.
But the survey also showed that demand remained lacklustre and that there were worrying signs that China was still relying too much on state-led investment to revive the economy rather than the private sector.
"The major driver right now lies only in the expectations of traders and they are not very keen to increase inventories right now because of cash issues," said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong.
"There is no catalyst right now. Everyone thinks commodities are cheaper but where is the catalyst?" he said.
With supplies tight, Chinese soy crushers are also under pressure to buy as demand peaks in December and January, but poor margins make a big November jump in imports unlikely. It is too early to point to a recovery in copper demand, with any increase in November volumes down to a shipment delay brought about by the weeklong October National Day holiday.
"The rise will have nothing to do with domestic demand," said Zhou Jie, an analyst at China International Futures.
Overall foreign trade is likely to remain weak, with a Reuters poll showing export growth might have slowed to 9 percent from 11.6 percent in October, with imports also easing to 2 percent from 2.4 percent. Still, traders suggested that sentiment is steadily improving, and there are signs that industrial activity is also on the road to recovery.
Preliminary power output data for November, issued this week by the State Electricity Regulatory Commission, showed a rise of 7.4 percent year-on-year, the fastest monthly increase of 2012.
The preliminary trade data will be released on Monday.
Crude oil imports may have risen again from a strong October level, with refineries forecast to have lifted production by over 4 percent from October, according to a monthly poll by industry consultancy ICIS/C1.
The launch of several new crude facilities such as PetroChina's 100,000-bpd Hohhot unit and Daqing's 120,000-bpd plant contributed to the higher refinery runs.
China imported 5.58 million barrels a day in October as new facilities came on stream and refiners ramped up output to replenish stocks.
Any increase in copper imports in November is likely to be a statistical anomaly brought about by the October holiday, which caused a delay to shipments, traders confirmed.
"Our bookings for November shipments were similar to October but actual arrivals were higher, with some metal due to arrive in October delayed by the holiday," said a refined copper trader at an international trading house.
China's imports of anode, refined metal, alloy and semi-finished copper products dropped 18.5 percent from the previous month to 321,879 tonnes in October.
Traders said they expected November imports of iron ore to show a rise following a price recovery in the previous month.
"Iron ore prices rose quickly after the (Oct. 1) holiday, prompting traders and steel mills to make bookings, and the shipments will have arrived in November," said a Beijing trader.
Although steel production dwindles in the cold winter months as construction activities decline, many traders traditionally take the opportunity to restock ahead of the Chinese new year.
Li Xinchuang, vice-secretary general at the China Iron and Steel Association, said last week that 2012 iron ore imports were expected to reach around 730 million tonnes, implying that overseas cargoes will hit around 65 million tonnes in November and December, up from 56 million tonnes in October.
Traders do not expect November soy imports to show any substantial recovery, even though shipments declined 18.9 percent in October, with crushing margins poor over the month.
Buyers canceled 500,000 tonnes of cargoes from the United States early in the month to avoid losses.
Still, local crushers are now facing shortages as the peak consumption season approaches, and buyers started to increase purchases in the second half of the month.
Margins, though still negative, are improving, especially after Beijing halted state stockpile sales in mid-November.