China’s February Trade Data Weren’t That Bad for Metals!


Mar. 10 2016, Published 8:40 a.m. ET

China’s February trade data

On March 8, 2016, China’s February trade data spooked the global markets. Stock markets across the globe fell after China’s trade data released. There were valid reasons for the severe reaction. China’s exports fell more than 25% YoY (year-over-year) in February. It’s important to note that falling exports aren’t a surprise. The markets don’t really expect China to post export growth YoY. However, it’s the rate of the decline that took the markets by surprise.

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According to Reuters, the rate of decline was twice what the markets were expecting. Incidentally, this is the second straight month that Chinese exports have been worse than expected. The slowdown in Chinese exports signals weakness in global demand. Chinese imports also fell 13.8% YoY in February. The slowdown in imports signals weakness in China’s domestic demand.

How will it impact metals?

China’s trade data are especially crucial for metal investors. China is the dominant player in all of the industrial metals from steel to copper. The impact of China’s slowdown is visible in all of the commodities (GCC). The above graph shows the movement of steel, copper, and aluminum prices. As you can see, all of the metals have fallen steeply over the past few years. China’s slowdown is the key factor that’s driving metals to multiyear lows.

Series overview

China impacts metals in different ways. In steel and aluminum, rising Chinese exports distorted the global markets. US producers including U.S. Steel (X), Alcoa (AA), and Nucor (NUE) have been crying foul over more exports from China for quite some time. However, in copper, we need to look at China’s imports of the metal. The demand slowdown in China was negative for US-based copper miners including Freeport-McMoRan (FCX).

China’s February trade data were terrible. However, it wasn’t all bad for metal investors.


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