Copper, nickel prices retreat on weak Chinese export data

Andrew Topf | March 8, 2016 | 3:19 pm Base Metals Copper Nickel

Yangshan Deep-water Harbour Zone, Port of Shanghai.

Well, that was shortlived. The rally that had investors clambering back into mining stocks came to an abrupt end today, as disappointing export data from China showed continuing signs of weakness in the world’s top commodities consumer.

Traders were quick to hit their sell buttons as official figures released in Beijing today showed exports in February were down a whopping 25.4 percent from the previous year – equal to the worst performance since May 2009, when the world was in the grips of a global recession. Imports were down by 13.8 percent, the 16th consecutive decline.

At the close of trading in New York, the Dow Jones industrial average was down 110 points and the S&P 500 lost 1.1 percent, slamming the brakes on five straight days of gains. CNBC reports energy leading the S&P decliners, off 4 percent, followed by around a 2 percent decline in materials. Crude oil had its worst performance since Feb. 11, losing $1.40, or 3.59 percent, to close at $36.50 a barrel.

“The pullback is a recognition of the fact that in China there is a lot of rhetoric about a stimulus package.”

In London, shares in mining firms were hit hard, with commodity companies at the crest of the wave pulling the FTSE 100 down close to 1 percent. According to the Guardian, Glencore (LSE:GLEN) swooned 18 percent to 139.75p, worsened by news of a mining accident in the DRC. Anglo American (LSE:AAL) dropped 15 percent, while Antofagasta (LSE:ANTO) and Rio Tinto (NYSE, LSE:RIO) both fell over 9 percent. The energy and mining company-heavy TSX also got slammed, with the energy group slipping 2.4 per cent and the materials group including precious and base metals miners and fertilizer companies, losing 2.2 per cent.

“This is a market that is rapidly outpacing fundamentals,” Reuters quoted Barclays commodities analyst Dane Davis. “The pullback is a recognition of the fact that in China there is a lot of rhetoric about a stimulus package.”

Getting mining-commodity specific, the worst-hit metals were copper and nickel, not surprisingly, given their dependence on industrial demand. Copper was on track for its biggest daily loss in four months Tuesday, dropping 2.4 percent to $4,878 a tonne on the London Metal Exchange. The red metal had surged 7 percent last week, for its best weekly performance since 2011, on Friday hitting as high as $5078 a tonne on the Comex in New York.

Nickel was worse off, sliding 5.1 percent to $8,880 a tonne on the LME, giving back the 2 percent gains on Friday that put last year’s worst-performing metal at $9,340 at tonne.

The grim metal price finishes came on the heels of a bearish set of reports from Goldman Sachs.

The influential bank said the 20-month commodity rout had further to run and prices needed to remain lower for longer to rebalance markets that are still groaning under the weight of plentiful supplies.

“Demand hasn’t really changed, [so] it takes lower prices to push and keep supply below demand to create a deficit,” said Jeffrey Currie, Goldman’s head of commodities research.

He added that any increase in raw material prices would prompt more supplies to enter the market, making it difficult for any advance to be sustained.