subject: Frbiz.com Reported Commodities Rise On Strong China Trade Data [print this page] Commodities prices are pushing higher once more Monday with a surge in Chinese import growth catching markets off-guard and demonstrating the country's still-voracious appetite for raw materials.
The prices of key commodities, such as copper and oil, are firmer after China proved it retains the mantle of the world's largest consumer of commodities. China's December exports grew by 17.7% on the year while imports surged almost 56% on the year, both higher than expected.
The rally in commodities comes as Friday's disappointing U.S. payrolls data for December have been largely forgotten. Meanwhile, selling as part of the looming annual commodity index reweightings is being soaked up in the renewed environment of rising risk appetite. The index reweightings are annual adjustments to allocations to individual commodities that take place to account for the changes in their value during the past year. Rebalancing and reweighting generally means an index may reallocate out of commodities that have appreciated and into commodities that have underperformed.
In recent London Metal Exchange trading activity, copper was up $179 a metric ton or 2.4% from Friday's close at $7,640 per ton, a 17-month high. Earlier the market hit $7,705 per ton. The front-month January futures contract on the New York Mercantile Exchange was up 6.3 cents to $3.45 a pound.
Light, sweet crude for February delivery hit its highest level in 15 months, recently trading 82 cents, or 1%, higher at $83.57 a barrel on Nymex. It touched an intraday high of $83.95 a barrel. China was a net importer of oil products for the first time.
Meanwhile, gold futures hit their highest level in a month in reaction to a weaker dollar and general commodity strength.
Having tapered off modestly towards the end of last year, commodities prices have been climbing again amid signs of a global economic rebound and the belief that a recovery will fuel demand for a broad range of raw materials. As China becomes an even greater consumer of raw materials, it's playing a key role at the heart of that buoyant demand.
While the volume of imports to China of some commodities, such as iron ore, soybeans and crude oil, are at or near record levels, traders said the volume of imports of other commodities was higher because of the low base a year ago.
Whether the growth is sustainable is another matter. Standard Chartered's Li Wei said buying by speculators was also a likely driver of the commodities imports growth.
Exports from China have been strengthening on an underlying basis for the past six months, but inventory building was anecdotally to blame. In copper, for instance, used in housing and construction, RBS Sempra estimates that 1.1 million tons of refined copper have accumulated in China between the third quarter of 2008 and the third quarter of 2009.
But the magnitude of December's increase suggests there is now more than inventory building taking place and that export growth will accelerate further
in the first quarter, RBS' Ben Simpfendorfer said. More importantly, the strong data may encourage the Chinese government to take steps to cool a potentially overheating economy.
"If first-quarter exports grow at around 30% and the external recovery looks sustainable, we think the authorities will indeed feel more assured to tighten domestic policy earlier, probably in the second quarter," said UBS' Tao Wang.
China's central bank unexpectedly raised a key interbank market interest rate last week for the first time in nearly five months, signaling a change in its policy focus toward pre-empting inflation risks in the new year.
by: Frbiz
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