Is China's Year of the Ox commods binge all bull?

Unfortunately for the bulls, the buying binge that kicked off the Year of the Ox last week had more to do with speculative deals, inventory re-stocking, government buying and post-holiday catch-up than with the start of an upturn in the real economy.

"Not the beginning of the end," Citigroup analyst Alan Heap called it in a recent note to clients.

"Beyond a potential short covering rally, underlying demand will likely remain weak through to the second half of 2010 and surpluses are forecast to increase across the complex for at least the next two years," he said.

Official figures are unlikely to be much help anytime soon, with this week's trade and output data for January distorted by the new year holidays, which last year fell in February. Coming months will also be distorted by comparisons with last year, when winter storms and an earthquake hit industrial production.

Meanwhile markets are focusing on short-term trade activity, including stepped-up iron ore imports from Brazil, arbitrage crude from Russia, a rash of unusual rubber purchases and a spate of soybean deals from Latin America to support the idea that the world's fastest-growing commodity consumer is on the mend.

With the moribund world economy struggling to see a way out of recession, however, sceptics question whether export-focused China has found enough demand to revive its own fortunes.

And not all commodities were equally impressed. While copper price rose strongly, oil and grain markets were flat last week.

STOCKING UP

At least a portion of the latest spate of buying can be explained by importers and corporates re-stocking inventories that they had let dwindle as demand fell in recent month, or which declined over the lengthy Lunar New Year holiday.