Concerns Arise as Weak Chinese Trade Data Leads to Drop in Copper Prices
Copper prices experienced a notable decline, reaching their lowest point in nearly a month on Tuesday. As weak Chinese trade and auto sales data raised concerns about demand from the world’s primary metals consumer. The three-month copper trading on the London Metal Exchange (LME) extended its losses over the course of three days, slipping by 1.9% to $8,323 per metric ton during official open-outcry trading.
This drop followed the weakest price observed since July 10.
While LME copper has managed to recover from its May dip below $8,000 per ton. Which marked its lowest in almost half a year, it still lags significantly behind its peak in January at $9,550.50.
Investor sentiment took a hit on Tuesday, as data revealed that China’s imports and exports experienced a much swifter decline than initially anticipated in July. This unexpected performance threatens growth prospects within the world’s second-largest economy.
Amelia Xiao Fu, Head of Commodity Market Strategy at Bank of China International in London, noted, “With the trade data worse than expected, risk aversion has returned, so metals are surrendering the gains we had a bit earlier.”
Copper had shown strength a week ago, reaching its highest point in over a month due to hopes for Chinese stimulus.
The economic indicators from China have sent mixed signals, as consumer inflation contracted in July, indicating weaker local liquidity and spending amidst slowing business activity.
The consumer price index (CPI) inflation fell by 0.3% in the 12 months leading up to July, a slightly better outcome than the expected drop of 0.4%. This marks the first annual contraction in CPI since September 2021, following a flat reading for June.
Furthermore, the data revealed that China’s passenger vehicle sales declined for a second consecutive month in July. Simultaneously, imports of unwrought copper and copper products dropped by 2.7% year on year. Despite the domestic market facing tight inventories, copper demand remained subdued due to the seasonal summer trade lull.
Additionally, a stronger dollar index weighed on the market after a U.S. Federal Reserve official indicated the likelihood of future interest rate increases.