Green Shoots or Red Herring?
A case study of Chinese raw-material demand.
Chinese raw-material imports surged in the first quarter. In contrast to bombed-out demand conditions in North America and Europe, the numbers are staggering: Chinese iron ore imports rose 19%, copper imports jumped 33%, and nickel imports were up 33%. Buoyant Chinese demand seems to have lent crucial support for raw-material prices as well as producer share prices, the latter of which are, in many cases, up more than 100% since January (see Freeport (FCX), Aracruz (ARA), and Teck (TCK) for examples).
This phenomenon appears all the more noteworthy given how widespread it has been (see our recent Stock Strategist article "Is China Leading a Global Rebound?" for more on this topic). Interestingly, surging Chinese raw-material demand can also be found in sectors not directly touched by Beijing's much-ballyhooed stimulus plan. One such example can be seen in the papermaking industry, where Chinese pulp imports have risen a staggering 70% through March.
Daniel Rohr does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.