China’s July trade data
China released its July trade data on August 8, 2016. China’s exports in dollars fell 4.4% YoY (year-over-year) in July. Imports fell 12.5%. Previously, China’s June exports and imports had fallen 4.8% and 8.4%, respectively, on a YoY basis.
China’s imports have now fallen for 21 consecutive months on a YoY basis. What’s worse is that July’s imports fell at the steepest pace since February. It’s important to note that the slowdown in Chinese exports signals weakness in global demand. Falling imports signals weakness in China’s domestic demand.
Notably, China’s July exports and imports both came in lower than what the markets were expecting. This comes at a time when US markets (SPY) are trading at record highs on the back of better-than-expected US economic data and dwindling rate hike expectations amid global uncertainty.
China’s trade data are especially crucial for metal investors. China is the dominant player in industrial metals, from steel to copper. The impact of China’s slowdown is visible in all of the commodities.
China impacts metals in different ways. In steel and aluminum, rising Chinese exports distort the global markets. US producers, including AK Steel Holding Corporation (AKS), Alcoa (AA), and U.S. Steel Corporation (X), have been crying foul for quite some time over growing exports from China. Although steel companies have managed to fend off Chinese imports by getting US authorities to impose anti-dumping duties, aluminum producers don’t have that privilege.
In copper, China’s imports impact the Market. The demand slowdown in China is negative for US-based copper miners such as Freeport-McMoRan (FCX).
In this series, we’ll analyze what China’s July trade data mean for steel, copper, and aluminum investors. Let’s start by looking at China’s aluminum exports in July.