Metal prices pushed down by weak Chinese imports

Posted on October 13, 2016

Metal prices are not liking China’s commodity import data.

Prices for copper, zinc, and nickel are all down today after data showed China’s imports of copper slowed in September, raising concern about demand in the largest consumer amid worries over a property bubble.

Imports of copper metal and semis fell 2.9 per cent in September to 340,000 tonnes, and 25 per cent from the previous year. That’s the biggest yearly drop in absolute tonnage since January 2015, according to Barclays.

Copper prices fell below $4,800 a tonne to trade at $4,774 a tonne on the London Metal Exchange Thursday.

Surging housing prices and easier credit in China have boosted commodity prices this year. But copper prices have only risen 1.8 per cent as investors worry about growing amounts of supply.

Analysts at Barclays said the softness in copper metal imports is due to rising Chinese domestic refined copper production, which has increased by 10 per cent this year. That’s also reflected in stronger imports of raw copper concentrate in September, they said.

Goldmans Sachs said they recommended investors go short copper prices as the metal enters a seasonally weaker demand season and amid a growing “wall of supply.”

In addition, analysts also worry that China could further tighten measures on its housing market as well as credit.

“We remain cautious on the outlook for Chinese commodity demand over the coming months as the stimulus effects fade,” Warren Kreyzig, commodities research analyst at Julius Baer said.

“Moreover, the recent export weakness for the manufacturing sector is likely to compound a seasonal slowdown in Chinese construction, impacting demand for commodities, in particular steel.”

Imports of steel raw material iron ore rose 8 per cent in September compared to the previous year, the second-highest monthly import volume ever recorded on the back of stronger steel demand. Iron ore futures in China have risen 33 per cent this year on the Dalian Commodity Exchange, according to Wind.

Coal imports have also been strong this year. While coal imports fell 8 per cent from the previous monthly in September, they are up 15 per cent this year, after government efforts to limit domestic production. That’s helped drive a rally in thermal coal prices this year with benchmark Newcastle prices up 85 per cent.

You must be logged in to post a comment Login