China’s back on its biggest commodity buying spree in yearsMining52 minutes ago
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Quietly and without any fanfare China has steadily increased its buying of certain strategic commodities including cobalt, iron ore and some foodstuffs over recent weeks and months.The industrial powerhouse has stepped up its purchases of coal rising 6.8 per cent on year, while iron ore is 11.8 per cent higher on year, and soya bean volumes have risen 17.7 per cent.China has taken delivery of an extra 348 Capesize cargoes of iron ore over January-July, bringing its imports for the period to 659 million tonnes, according to Hellenic Shipping News.Don't be the last to knowGet the latest stock newsand insights straight to your inbox.NameNameEmail*EmailIt's free. Unsubscribe whenever your want.Read our privacy policyAustralia of course ships a lot of these minerals to China and is cashing in on the boom.Beijing is expected next month to order increased buying of some commodities to bolster its reserves ahead of its 2021-2025 five-year plan period, according to news service Bloomberg.China’s imports of coal, iron ore and soya beans at highest for several yearsChina has increased its import volumes of key commodities: Hellenic Shipping NewsMarket weakness encourages Chinese buyingChina has gone through periods of high demand for commodities before, but some market experts are wondering if the Asian country’s elevated demand this time is different.As one of the largest consumers of many commodities, it makes sense for Chinese buyers to swoop in when prices are low and to stockpile purchases, said Minelife founder director and senior resources analyst Gavin Wendt.“What I have noticed is during periods of volatility when commodity prices for iron ore and copper have market weakness, you hear news stories of China increasing its purchases of these commodities,” said Wendt.“Iron ore and copper are key components of China’s economic growth that has been stimulated through government investment,” he said.“China is buying iron ore because it needs it to feed its factories, and Australia is a reliable supplier,” he added.Chinese buying can spark a sudden change in commodity price fortunes and can encourage market participation by investors effectively putting a floor under commodity prices.“Investors and funds may say ‘look China is back in the market’ and this puts a floor under prices,” Wendt said.Post-COVID recovery spurs commodity demand tooDanny Huang, an analyst at S&P Global Ratings based in Hong Kong, said China’s demand for commodities had generally increased as the country recovers from the COVID-19 pandemic.“From the latest economic data released Tuesday, China is continuing its recovery path on fixed assets investment, industrial production and consumption. This is driving demand for commodities,” he said.“Whether the buying is over and above typical volumes for this time of the year depends on (the) commodity.“For example, China’s crude steel production reached a record high of 95 million tonnes in August, an 8.4% increase year-over-year. That is one of the reasons upholding strong iron ore prices,” he added.Cobalt is an in-demand metal for ChinaAfter an extended market lull, spot prices for cobalt started to rise last month reflecting stronger demand, and have hit $US33,000 per tonne, according to the London Metal Exchange website.China’s State Reserve Bureau, which manages the country’s strategic commodities stockpiles, has told traders to buy more cobalt, a metal used in electronics, according to reports.“Cobalt’s production largely comes out of one country, the Democratic Republic of Congo,” Wendt said.“In the case of more strategic metals like cobalt China’s buying is two-fold. One it is taking advantage of low prices, and two it is buying the material while it can to avoid possible supply hiccups.”It is not only cobalt, prices for other metals such as aluminium have enjoyed a good run up.China has led a revival in aluminium pricesLME aluminium prices are back at pre-March levels: Source LMEChina stockpiling excess aluminium productionAluminium is back over $US1,700/tonne for the first time since early March, said the LME.China’s aluminium smelting industry is producing record volumes – 100,000 tonnes per day.“Looking at the year as a whole, both steel and aluminium production are clearly on track to reach record levels,” Commerzbank analyst Daniel Briesemann said in a research note.“Despite the solid demand, we believe that China is producing in excess of demand and is stockpiling a lot of material,” he added.What is certain is that Australia, as a producer of many sought-after commodities, is well-placed to gain from China’s stronger demand for cobalt, coal and iron ore, and grains.Subscribe to our daily newsletterJoin our small cap Facebook groupFollow us on Facebook or TwitterREAD MOREBATTERY METALSCOALCOBALTCOPPERIRON ORERARE EARTHSSMALL CAPSSHAREYou might be interested inTRENDINGNewsRise and Shine: What you need to know before the ASX opensSeptember 17, 2020 | Nick SundichTRENDINGMiningLefroy firms up tenement over Burns copper-gold prospectSeptember 17, 2020 | Special ReportTRENDINGEnergyWhy did East Energy Resources and Sagalio Energy rocket ~1000pc on no news?September 17, 2020 | Mike CooperTrending in MiningResources Top 5: Investors load up on fresh goldies, vanadium battery hopefulLefroy firms up tenement over Burns copper-gold prospectChina commodity demand expected to 'hold up well' for remainder of 2020High-grade hits hint at gold potential of Great Northern’s Big Rush projectPacific American adding gold to its renewables, coal portfolioEditors PicksBitcoin v GoldBitcoin v Gold: Can the cryptocurrency steal the safe haven crown?Investor view: The road ahead for ASX fintech disruptors after a big 2020Dividend Stocks: Here are some of the ASX's most generous payersASX pot stocksThe ASX pot stocks looking to get high on Canada's $3bn marketT.Rowe Price favours 'small cap and emerging market stocks' in post-Covid erastockhead logoABOUT USMEET THE TEAMSTOCKSCONTACT USADVERTISEfacebook icontwitter iconinstagram iconlinkedin iconemail iconStockhead is providing factual information where there is a reasonable likelihood of doubt.The information is not intended to imply any recommendation or opinion about a financial product.Terms of usePrivacy PolicyCopyright 2020
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