BEIJING (Reuters) - China’s raw materials purchases slowed in October from record-breaking levels a month earlier, the latest sign that Beijing’s factories have been clearing inventory ahead of unprecedented government steps to curb smog over winter.
Part of the slowdown from September was seasonal, with factories shut for a week-long national holiday and cutting output ahead of the Communist Party Congress earlier this month.
Imports of commodities from crude oil and iron ore to coal and copper all fell, underscoring expectations of lower demand from the world’s biggest buyer in the months ahead.
“China’s imports of major commodities weakened in October, driven by environmental constraints in various industries amidst the normal seasonal downturn,” said ANZ analysts in a note.
Even with the seasonal factors, “the market may view the data as mildly negative,” they said.
The impact of the war on smog was most stark in iron ore, with imports sinking from record levels in September to their lowest in 1-1/2 years as steel mills in the world’s top producer slashed output and worked off inventory.
Mills, aluminum smelters and other heavy industries have been ordered to curtail production during the coming winter as the government hardens efforts to fend off smog.
Coal imports fell in October from a month earlier, curbed by efforts by the world’s top buyer to replace coal with cleaner fuels in the northern part of the country to meet tough air quality targets.
China aims to eliminate 44,000 coal-fired industrial boilers and replace coal-fueled household heating with gas or electricity in millions of residences.
“Coal consumption was curbed by output cuts ... driving coal prices down and making imported coal less competitive compared to the domestic fuel,” said Xu Bo, analyst at Haitong Futures.
Crude oil arrivals fell to their lowest since October last year, pressuring futures prices even as OPEC-led supply cuts continued to provide support.[O/R]
Data released at the same time showed the country’s total exports rose at a slower pace last month as expected, but import growth beat forecasts in a sign domestic demand remained robust despite the pollution crackdown that analysts say will reduce factory output and crimp overall economic growth.
For more details on the data, see: [CN/TRADE]
Reporting by Asia Commodities and Energy team; writing by Josephine Mason; editing by Richard Pullin