On November 9, the National Bureau of Statistics of China released price inflation data for October 2015, which came in lower than expected and lower than September’s data. This resulted in a fall in the prices of copper and other base metals on November 10.
Chinese slowdown is weighing on copper
China is the world’s biggest consumer of copper, accounting for 45% of global copper consumption. Any disappointing macroeconomic data related to China negatively affect the prices of copper and other base metals. LME (London Metal Exchange) three-month copper prices have fallen 22% since the beginning of the year because of the slowdown in the Chinese economy.
China’s inflation shows further economic slowdown
China’s consumer price index (CPI) is a key measure of purchasing trends and inflation in the country. An increase in the CPI should be positive for the Chinese economy and vice versa. China’s CPI rose 1.3% in October, although it missed expectations of 1.5%. The increase was also below September’s CPI increase of 1.6%. This raises concerns about declining growth in the world’s second largest economy. On November 10, LME three-month copper prices fell by 0.8% on weak Chinese CPI data.
Strong dollar is also weighing on copper
In addition to the Chinese CPI data, the movement in the dollar index led to a fall in the price of base metals. Recently the dollar has been gaining strength because of strong US economic data. On November 10, the dollar hit a seven-month peak and kept the pressure on base metal prices. This also had an impact on major mining companies such as Freeport-McMoRan (FCX), Glencore (GLEN), and Alcoa (AA). Major base metal ETFs such as the SPDR S&P Metals & Mining ETF (XME) and the PowerShares DB Base Metals Fund (DBB) also fell on the day because of the weak China CPI.