Talks of a Slowdown in China: What Investors Should Know




In the past few years, global metal markets have been discussing the slowdown in China’s metal demand and how it could impact metal prices. As China (FXI) transitions from an investment-driven to a consumption-driven economy, its metal appetite has taken a breather. The demand growth rates have fallen compared to what we saw a decade ago. However, China’s metal demand enterprise continues to move forward.

China is the world’s biggest copper importer. Copper mining is concentrated in Latin America. Companies including Antofagasta (ANTO), Southern Copper (SCCO), and Freeport-McMoRan (FCX) operate copper mines in the region.

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Copper imports look strong

Notably, copper demand is seen as an indicator of economic activity. Looking at China’s copper imports data, we get a good picture of the country’s economic activity. China imported 475,000 metric tons of unwrought copper in May—compared to 390,000 metric tons in May 2017. In absolute terms, China’s unwrought copper imports in May are at the highest level since December 2016. In the first five months of 2018, China’s unwrought copper imports have risen 16.8%—compared to the same period in 2017.

Copper concentrates

China’s copper concentrate imports have also been strong this year. In May, the country imported 1.58 million metric tons of copper ore and concentrates—37.4% higher than in May 2017. On a year-to-date basis, China’s copper concentrate imports have risen 14.4%—compared to the same period in 2017.

Higher Chinese copper imports are positive for copper prices especially at a time when there are looming concerns about the supply from BHP Billiton’s (BHP) Escondida mine—the largest copper mine globally.

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