The good news, apparently, is that Chinese exports are up.
Bloomberg reported this week that a rally in oil and metals prices was triggered by news of an export jump in China. China's exports during May grew by 48.5% year-on-year. Leading to a Chinese trade surplus of $19.5 billion.
This does seem like good news, especially after China ran a trade deficit during March and April.
Here's the bad news (at least for commodities investors). It looks like at least some of the exports are metals.
Recent customs data show that China exported 48,546 tons of primary aluminum in April. Aluminum imports came in at just 28,987 tons, making the nation a significant net exporter.
Compare this with a year ago. In April 2009, China exported just 118 tons of aluminum. The spigots have opened.
Of course, some of this is due to recovery in aluminum demand. Japanese aluminum imports were up 37% in the first four months of 2010, year-on-year. Chinese aluminum makers are undoubtedly trying to capitalize.
But the greater concern is that some of the Chinese exports may consist of stockpiled aluminum (and other metals). As we've discussed many times, China built huge inventories of metal over the past year and a half. If these were to come back to market, they could swamp prices.
I talked last week about increasing anecdotal evidence of growing Chinese commodities exports. The above aluminum statistics support the thesis.
Of course, it remains to be seen how much of this is stockpile drawdown versus new production being exported. If it is the former, it would be most ironic that commodities prices are rallying on news of growing Chinese exports. Exports of those very commodities. Exports that could put the crimp on prices.
By. Dave Forest of Notela Resources