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Higher demand from Chinese buyers led to a record-high importation by China of cooper and iron ore from major sources such as Australia and Chile. Bloomberg reports that besides using these commodities for construction, it also serves as collateral to secure credit.
In January, shipment of copper to China went up 53 per cent to 536,000 metric tonnes compared to a year ago. Shipment of iron ore for the same period grew 32 per cent to 86.83 million tonnes, according to the country's General Administration of Customs.
With the unexpected strong demand for the two commodities by China, it may help reduce forecast global surplus of these materials and support copper futures that shed 3.2 per cent since January in London as well as the 11 per cent reduction in iron ore delivery to Tianjin.
But the Sydney Morning Herald partly attributed the record-high importation of copper and iron ore to stockpiling ahead of the Chinese Lunar New Year holidays instead of higher consumption of the two materials.
Sijin Cheng, a commodities analyst at Barclays agreed that stockpiling is partly the reason for the surge in shipment, and she forecast that February import figures would go down.
Mark Keenan, head of commodities research in Asia at Societe Generale, said, "If China retains an element of stability, it will calm sentiment toward the rest of the emerging markets."
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