China's raw material imports tell their own story

China's full trade report for May sprung few surprises in terms of headline imports of base metals. As flagged by the preliminary snapshot released earlier this month net imports of refined copper were weak at 129,000 tonnes, albeit slightly higher than those in April thanks to a drop-off in exports to 20,000 tonnes from 44,500 tonnes.

Net imports of primary aluminium shrank to 3,300 tonnes, the lowest monthly figure so far this year, while exports of product accelerated to a new all-time high of 340,000 tonnes.

The latter is thought to reflect exporters rushing to beat an expected tightening of the tax rebates on several product categories. Net imports of both tin and nickel at 800 tonnes and 13,600 tonnes respectively marked a continuation of recent trends.

Net trade in lead remains broadly flat, while China continues to import zinc it doesn't need in what appears largely a function of "financial" arbitrage. More interesting this time around were some of the raw materials numbers.

China's imports of alumina, by contrast, slumped to a multi-year low of 113,500 tonnes in May. It wasn't a rogue figure. Imports fell by 16 percent last year and have fallen harder still this year. The cumulative Jan-May total of 945,000 tonnes marked a 57-percent year-on-year drop.

Remember that Chinese aluminium smelters have been churning out record amounts of the light metal this year so the slump in alumina imports is not for want of demand. Rather, China's own alumina production has been rocketing in recent months. It surpassed the 3-million tonne level for the first time ever in May and cumulative output this year has increased by 16 percent.

Indeed, based on figures from the National Bureau of Statistics and using a 2:1 ratio for the amount of alumina needed to make one tonne of aluminium, China has been generating a surplus of the raw material for the first time ever this year.

Not that it is self-sufficient in the bauxite needed to make the alumina. Imports hit a new high of 4.5 million tonnes in May and cumulative flows jumped by 56 percent in the first five months of 2011.