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China’s April Trade Data: Outlook for Metal Investors

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May. 8 2019, Published 8:48 a.m. ET

China’s April trade data

On May 8, China released its trade data for April. The country’s imports were better than expected and rose on a YoY (year-over-year) basis for the first time since November 2018. However, China’s exports contracted. China’s trade data are widely followed and crucial for metal and mining investors. China has a dominant share in global metal consumption. The country accounts for almost half of the global steel, aluminum, and copper demand.

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From a supply perspective, China is the largest steel and aluminum exporter. China is the largest copper and iron ore importer. Steel companies like U.S. Steel Corporation (X) and AK Steel (AKS) see higher Chinese steel exports as a challenge. U.S. Steel Corporation and AK Steel have sagged despite the Section 232 tariffs. Alcoa (AA) said that the tariffs haven’t helped solve the core issue of Chinese overcapacity.

Copper imports

China’s copper imports offer insights into the country’s copper demand. Last month, China imported 405,000 metric tons of unwrought copper—a fall of 8% YoY (year-over-year). However, China’s imports rose on a monthly basis. China’s unwrought copper imports have fallen YoY for three consecutive months.

Looking at copper ore and concentrate, the Chinese imports were 1.66 million metric tons in April—7.1% higher compared to the same month in 2018. However, China’s imports fell 6.2% on a monthly basis. While there have been concerns about China’s copper demand, copper miners like Freeport-McMoRan (FCX) have sounded optimistic about China’s copper demand outlook.

The metals and mining space is underperforming broader markets this year. The SPDR S&P Metals and Mining ETF (XME) has risen 9.5% this year, while the SPDR S&P 500 ETF (SPY) has risen 15.7%.

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