SHANGHAI (Reuters) - China’s oil refineries ran at lower rates in October, and output from steel mills and power plants also dropped, as a credit freeze bit into demand for industrial commodities in the world’s second-largest economy.
But the lackluster data should be considered against more sanguine economic indicators which showed October inflation falling sharply, factory output falling slightly and fixed asset investment still robust -- allaying any fears that China economy is poised to slow down sharply amid a gloomy global outlook.
“We may have reached a bottom in China’s slowdown for commodities demand but it is still too early to say when the recovery will come,” said Henry Liu, head of commodities research at Mirae Assets in Hong Kong.
“But one thing we can be sure is that any rebound in 2012 will not be as robust as we saw in 2009 and 2010. There will be growth but it won’t be spectacular.”
China’s refinery throughput for October fell 0.9 percent from a year earlier to 8.74 million barrels per day (bpd), the second decline this year, as planned and unexpected shutdowns cut into operations, while total power generation of 364 billion kilowatts was at it lowest since February.
The National Bureau of Statistics said China processed 37.11 million tonnes of crude oil in October. On a daily basis, it was 0.5 percent lower than the 8.78 million bpd recorded in September.
However, both are expected to rebound on the back of winter heating demand, as the government orders refineries to run at full capacity to cover the fuel shortage and power stations ramp up output to make up for poor hydropower generation.
In previous years, power generation typically posted monthly falls in September and October, before rising for the rest of the year.
Separately, China’s production of refined copper fell to its lowest level in five months in October, which was its second decline in as many months, but analysts said the fall was due to a shortage of raw materials copper concentrate and scrap instead of poor downstream demand.
Refined copper production stood at 469,000 tonnes in October, a drop of 2.1 percent compared to September, but a 16.4 percent increase on the same month a year ago, data from the National Bureau of Statistics showed. Output reached a monthly record 518,000 tonnes in August.
Daily crude steel output in the world’s largest producer fell to its lowest level since December 2010 as mills across the country closed for repairs in an attempt to head off a collapse in demand.
China produced 54.67 million tonnes of crude steel in October, down 3.58 percent compared to September.
But a rebound may not come so soon for the sagging steel sector, which has seen spot trade grind to a halt in recent months as the government’s aggressive tightening campaign and clamp-down on real estate sector choked off demand from traders and developers.
Although inflation in October has dropped to 5.5 percent, Beijing has stressed that there was no need to change its monetary policy. Premier Wen Jiabao has said in a strongly worded speech that it would not back down on property curbs.
With the steel-intensive shipbuilding sector also struggling with a sharp slowdown as overseas orders dry up, this means China’s steel demand could remain anemic until early next year until the government eases liquidity.
Still, with the property sector accounting for 12 percent of China’s GDP, analysts said Beijing would make sure the industry does not collapse, while development in third and fourth-tiered cities would help cushion weaker demand elsewhere.
Editing by Himani Sarkar