Chinese trade data for December has just been released with both imports and exports printing better-than-expected. Exports rose 9.7% on year, well above the 4.7% rate of November and expectations for an increase of 6.8%, while imports, down 2.4% from -6.7% previously, also beat despite huge decline in key commodity prices. As a result the trade balance narrowed to $49.6b, down from $54.5b in November.

China Trade Balance Dec 2014

While markets seem fixated on continued falls in commodity markets, it appears that China has been taking advantage of the continued carnage in paper markets with imports volumes of crude oil and iron ore both hitting record highs for the month. Crude oil imports jumped 19.5% while iron ore demand surged 28.9%, the largest month-on-month percentage increase since November 2013.

China Crude Oil Imports Dec 2014

 

China Iron Ore Imports Dec 2014

With WTI futures down another 7.85% in January as of the time of writing, all eyes will be on the January import volumes data given continued weakness across the commodities complex.

China Crude Oil Imports v WTI

While no doubt that some in the markets will be sceptical of the numbers, Chinese data hasn’t been the most trustworthy source of information in the past, taken as is it’s clear that China isn’t concerned about commodity price falls, it’s welcoming it. While a strong trend is often hard to turnaround, should paper markets pick up on the idea that China is actively buying, and aggressively at that, the short squeeze in the likes of crude and other key commodities could be savage given positioning and sentiment at present. All eyes then on the European and US price action this evening…

 

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