Chinese exports sluggish, commodity imports steady

The headline Chinese trade data were subdued, with exports in particular pretty slow at 4.3%YoY.  These data have been distorted by false exports to gain access to RMB, so its hard to know exactly how strong the external sector is.  But in general, it doesn't seem to be picking up quickly in line with better growth elsewhere, suggesting the strong RMB is making an impact.

On the import side, the preliminary data showed that broadly maintained levels seen last month, while iron ore continued its saw-tooth pattern at high levels

Over 2013, total refined copper imports were down 2%, although that masks the big shift in the second half of the year as consumption surprised to the upside and stocks were rebuilt.

It appears that inventories in China have been rising over the past few months, notwithstanding the drop in SHFE inventories.  Its now up to consumption to maintain momentum to keep Chinese interest in ex-China copper up at these prices.  There are signs that this maybe turning somewhat, although not definitely so at this stage.

Iron ore imports are to a large degree a function of availability on the seaborne, unless mills are choosing to draw down inventories. This is because seaborne material makes much larger margins than high cost domestic production, which tends to drop out when prices fall sharply. The drop in imports in December is probably down to timing of receipts more than anything fundamental.

Over 2013, iron ore imports were up a huge 75.8mt, which is pretty much all the growth in seaborne market supply.  This additional growth, however, doesn't appear to have displaced any high cost production in China because steel production has proven to be so strong.  Indeed, given the reduction in inventories over the year, it has proven to be not enough additional supply

That means you don't need a lot of growth in Chinese steel demand in 2014 to keep iron ore price high, on average through the year.  So even though seaborne supply growth will be strong in 2014, the iron ore market should remain in decent shape.