Li Jing, managing director and chairman of China Securities Markets at JPMorgan Chase, said in a report released yesterday that China's raw material imports have been very strong recently, with iron ore, copper, aluminum and even coal hitting record import volumes. The driving force behind this import is strategic reserves and arbitrage buying.
Iron ore imports are mainly due to the market's expectation that infrastructure will drive a rebound in fixed asset investment. Given the high inventory levels, the still grim economic fundamentals, and the government's growing concerns about the expansion of the steel industry, JPMorgan Chase believes that iron ore imports will gradually decrease in the coming months.
JPMorgan Chase believes that China is taking advantage of the sluggish global demand to actively build reserves of various commodities. Given the low prices of raw materials, the State Administration of Material Reserves has recently bought a large amount of copper, nickel, tin and zinc. Taking aluminum as an example, due to the fact that domestic aluminum prices are higher than import costs, arbitrage buying has led to an increase of more than 4 times in aluminum imports in April, reaching a record 362,400 tons.
In terms of energy, China's crude oil imports began to grow significantly from April, with a year-on-year increase of 13.6% in that month. In May, crude oil imports reached 17.09 million tons, a 14-month high. Although overall domestic demand has declined, the increase in strategic reserves will continue to increase crude oil imports.
that China's imports of coal, the main self-produced resource, also hit a record high, with data in May of 9.43 million tons, and cumulative imports from January to May rose to 32.2 million tons (a year-on-year increase of 72.6% over the same period last year).
JPMorgan Chase believes that China's recent economic stimulus plan, which focuses on infrastructure, has brought certain support to the commodity market; the recovery of the real estate industry has also greatly promoted the prices of raw materials such as steel and cement. The Chinese market occupies a very high position in the global commodity market. It is expected that China's demand for commodities will continue to remain at a high level, which will effectively drive the price trend of commodities.
JPMorgan Chase recommends that investors should carefully choose investment sectors, and industries linked to resources, such as coal, oil, cement and other sectors, will have relatively outstanding performance
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