There are early signs that China's appetite for overseas oil, copper, aluminium, iron ore and coal will recover in the second half of 2011, having been dogged for much of the first half by the government's campaign to put the brakes on growth and inflation.
Higher seasonal demand, shrinking stockpiles and a narrowing arbitrage between domestic and LME prices indicate that China's copper demand may be turning a corner, even if Beijing doesn't relax its tightening stance.
The country's power shortages, expected to be the worst in seven years, could also be a boon for imports of refined aluminium as domestic smelters are forced to shut, while coal and oil would also benefit.
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This means current prices of some of these key commodities could be seen as a bargain in a couple of months.
"Industry cross-checks show that there has been significant destocking for copper and others such as iron ore and coal," said Andrew Driscoll, a Hong Kong-based commodities analyst at CLSA. "Should inflation be reined in, which we expect it would be, then we should see restocking activity fed by a recovery in imports in around the third quarter."
The retreat in commodities prices this month, which saw oil and copper as much as 17.6 per cent and 16.5 per cent respectively below their peaks for the year, came on the back of growing fears of weaker economic growth.
Soft economic data from China, the main contributor to world demand growth for the past two years, also added to the panic as some investors began to worry about a "hard landing".
But many leading banks, including HSBC and Standard Chartered, say such fears are exaggerated, as recent output data suggest China's gross domestic product was still growing at a 9 per cent clip, while waning inflation would give Beijing room to prop up growth if needed.
Copper imports in China, the world's second-largest producer after Chile, slumped 21 per cent from a year ago to 596,000 tonnes in the first quarter and tumbled another 48.3 per cent in April as the arbitrage window for profitable imports was closed.
But that long-awaited arbitrage may finally re-emerge after the comparative price levels briefly flirted with break-even levels for imports earlier this month and copper futures traded on the Shanghai bourse moved into a backwardation.
"At the very least, destocking has run its course, and consumers' hand-to-mouth buying is eating into broader domestic inventories," Nicholas Snowdown, an analyst at Barclays Capital, said.
He pointed to a sustained decline in inventories at bonded and unbonded warehouses and rising premiums for copper cathodes to around $US60 a tonne, from close to nil at the start of the year.
Copper stocks in warehouses monitored by the Shanghai Futures Exchange fell for ten straight weeks on May 27 to a 21-month low of 82,309 tonnes. Total stocks have dropped 54 per cent from the peak of 177,365 tonnes recorded in March.
"The implication is that we are approaching a pivot point where the flow of material into surrounding LME Asian warehouses will ultimately reverse," he said on Sunday.
An easing of the country's monetary tightening policy, which some leading banks expect to happen in the summer, would also further boost imports, said Fu Bin, an analyst at Jinrui Futures.
Since Beijing made fighting inflation a priority in October, it has raised rates four times and raised reserve requirements on eight occasions, locking up bank deposits that would otherwise have been lent.
But easing inflation, moderating industrial activity and growing cries of a severe margins squeeze from small-and-medium enterprises could soon herald an end to the tightening cycle.
Similarly for the oil markets, where China is the world's second-largest consumer, refiners may be forced to return to the market en masse as new refining capacity comes online.
JPMorgan's oil analyst Lawrence Eagles said an end was in sight to China's crude oil de-stocking, arguing that the incentive for Chinese refiners to rebuild supplies emerges when Brent crude dips below $US110 a barrel, as that price level is enough for them to lock in positive margin.
This afternoon the price of Brent crude was at $US114.95 a barrel, down from a peak above $US127 last month.
The current power crisis is also poised to hike oil, diesel and coal imports in the coming months, as happened in 2004 and late 2010, when similar power shortages prompted manufacturers across the country to turn to diesel-fueled generators.
Power deficits in the 26 provinces and regions serviced by the State Grid Corp of China will total at least 30 gigawatt this summer, and could increase to 40 GW if coal and water stocks drop lower than expected.
China made a painful choice of raising power prices for industrial, commercial and agricultural users in some regions by about 3 per cent in an attempt to prevent the power crisis from spiralling out of control, a move which could cause domestic coal prices to rise.
China's domestic coal prices have already climbed about 10 per cent since March to its highest in more than two years, as a severe drought in central China has pressured state-owned thermal plants to scramble for more supplies to crank up generation.
"There's no doubt we will see a lot more (coal) imports going into China in the coming months and for volumes to exceed last year's average to reach around 15 million tonnes," said a Singapore-based trader.
Power cuts for heavy industrial users, especially aluminium smelters, would also hit domestic output, bolster prices and in turn lift imports, analysts said.
"The recovery in imports for a range of commodities in the second half should accelerate and extend through 2012," said Peter Hickson, a commodities strategist at UBS.
"We're in the first-year of the 12th five-year plan and there's going to be a lot of big spending on infrastructure and hard assets towards the end of the year that will boost demand for a lot of commodities."