Base Metals Hammered by Weak Chinese Data
Weak Chinese economic data
In the week ending on November 13, the base metals got hit by a series of disappointing global economic releases. The weak economic data from China, disappointing Eurozone GDP, and strong US dollar worsened the sentiment around base metals.
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China is the top consumer of base metals, accounting for 45% of global demand. The economic releases from China will have a huge impact on copper and other base metal prices. The economic situation in the world’s second-largest economy is one of the main drivers of base metal prices. In this year, the poor economic health of China resulted in falls for all base metals.
Disappointing Chinese imports and inflation
The week started with a release of weak Chinese imports data. The data showed a 4.2% fall in copper imports in the first ten months of 2015 compared to same period in the previous year. This dragged the price of copper to a two-month low on November 9. This was release was followed by China’s inflation data on the next day. Base metals extended their losses on November 10 because of the deceleration in October’s Chinese Consumer Price Index (CPI) that came at 1.3%. This was below the expected rate of 1.5% as well as the previous month’s value of 1.6%.
China’s industrial production and credit activity
The economic releases like China’s industrial production and its credit activity raised concerns on Chinese economic health. October’s Total Social Financing (TSF) of China fell by 63% from September’s value. This is the lowest level in the past 15 months.
Such disappointing data from China resulted in the fall of major base metal mining companies like Freeport-McMoRan (FCX), Glencore (GLEN), Alcoa (AA), and BHP Billiton (BHP). The base metal mining ETF SPDR S&P Metals & Mining (XME) also ended the week in a fall.
For further reading on Chinese credit activity, please refer to How China’s Credit Activity Data Disappointed Base Metals.