Barclays: Chinese Precious Metals Imports
Although there are signs of improvement, silver industrial demand continues to look vulnerable in the near term, said Barclays in a report.
China July Silver imports fell, but were down just 4% y/y (compared to 19% y/y in June) at 272 tons while exports remained subdued at 36.9 tons, declining by 50% y/y but improving from June’s low of 25 tons.
This was lowest level since the start of Barclays database in January 2005, keeping China a firm net importer of silver.
But there was also positive news in the silver data, given that the product breakdown revealed while unwrought, semi-manufactured and jewellery imports continued to fall, silver powder imports recovered in July, increasing by 56% y/y, thus cutting the decline for the year to date to 7% y/y.
The trade data for July again painted a mixed picture for China’s appetite for precious metals but there were signs of broad improvement.
Platinum and Palladium
Platinum imports continued to recover, and indeed doubled y/y while palladium imports fell at a slower pace in July but recovered m/m. Silver imports declined y/y for the 22nd straight month, albeit at a much slower pace.
Platinum imports doubled y/y in July to 239koz and rose by a fifth m/m, extending the picture of recovery for platinum consumption for a third month and taking imports up by 3% y/y for the year to date. Furthermore, it bodes well that imports into Hong Kong have also improved this year — – compared to declining last year and, in part, offsetting the strength in Chinese imports — and collectively platinum imports into China and Hong Kong are up by 16% y/y for the year to June (latest data available).
Indeed, volumes traded on the Shanghai Gold Exchange rose by 60% y/y in July as local prices continued to fall, dipping below 300CNY/g, and stimulating demand as interest remains price sensitive. Thus, it is unsurprising volumes have come off as prices have risen over the past few sessions following the supply disruptions in South Africa .
Given inventory levels have fallen, despite the pick up in prices, Barclays expects platinum imports to continue to improve given the metals’ discount to gold. Platinum has found the most support across the industrially biased precious metals in China, but palladium has also shown signs of improvement. Palladium imports fell by 14% y/y to 63koz (compared to a decline of 30% y/y in June) but rose by 8% m/m. On a positive note, auto sales in China have continued to grow and were up by 8% y/y in July but were down 13% m/m due to seasonality.
However finished goods inventories have started to fall but remain above the historical average of 1.2 months while China’s Association of Automobile Manufacturers has revised up its forecast for auto sales to 11% y/y growth from 9.5% y/y for 2012. Sales have grown by just over 3% y/y thus far, implying a strong recovery in H2 12.