China’s iron ore, copper imports rise in July Macquarie Research,

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China’s iron ore, copper imports rise in
July
 China published preliminary import and export data for key commodities on
Wednesday. We review the data in detail and highlight the rise in imports of
iron ore as seaborne supply increased, as well as the rise in copper imports,
which suggests solid demand, with stocks reported to be low all the way along
the domestic supply chain.
Latest news
 Most LME base metals prices fell in trading on Wednesday as worries over
the economic outlook, especially in Europe, returned to unsettle the markets.
Copper closed down by 1.6% on the day to $8,573/t, but above its 2011 lows.
The aluminium price dropped by 0.5% following the delivery of 195,850t onto
warrant to a warehouse in Vlissingen on Tuesday, increasing total inventories
in that location to almost 600,000t. We expect more aluminium moved onto
warrant here in the coming weeks and months.
 Precious metals prices were mixed. Another day and another new record was
registered for gold, which gained 2.1% to $1,772/oz. Platinum made a
modest advance, although it continued to trade below gold, while sister metal
palladium remained below $750/oz.
 Reuters, citing unnamed government sources, reported that Chinese social
housing targets for 2012 could be cut by 20% to 8m units. We believe this
may have a negative impact on sentiment, but we do not believe it will have a
meaningful impact on construction activity or demand for commodities. We
note that commodity housing construction (developers building units for sale
to the public) has been very strong this year, driven by persistent demand. It
is true that property purchase restrictions have been put in place in a number
of cities to cool investment demand; but the resulting weakness in sales has
been focused in first and second tier cities. These cities make up only 20% of
the real estate market in terms of floor space. Floor space of commodity
housing sold across China as a whole is up 13% YoY.
 We have been sceptical about the 2011-12 targets so far this year, given the
general lack of both intensity and money at a local government level. It is
worth reiterating that even if social housing is having an incremental impact, it
would take time for any slowdown in commodities demand to be felt following
a slowdown in starts. Construction activity on this year's starts will roll over
into 2012, meaning it would probably be 18 months before any impact of
slower starts would actually be felt.
 Preliminary port data show that Indian iron ore exports totalled only 3.56mt in
July, down 19% YoY and (aside from September 2008) the lowest monthly
total since 2003. This again highlights the difficulties in exporting iron ore
from the country, with exports from the southeastern states the big YoY delta.
 Chinese auto production was sluggish in July, rising by 1.3% YoY to 1.3061m
units, or 15.4m annualised. YoY growth has improved from the 0.9% recorded
in June and the -4.8% YoY in May. Passenger vehicles appear to be
performing much better, with commercial vehicle production down 7% YoY
YTD. Falling oil prices should support better sales coming into the end of the
year, while a relaxing of restrictions on credit should support CV sales.