By Leon Westgate
The first batch of Chinese economic data came in pretty much in-line with the leaked reports yesterday, with exports exceeding expectations by a significant margin. With the positive result priced in already however, the metals came under pressure initially during overnight trade with arbitrage-related selling and larger than expected drop in the preliminary copper import figures seeing the red metal attract most of the attention early on.
The metals have recovered heading into the afternoon, boosted by a stronger Euro, and the generally positive economic data out of China and Japan. Prices have drifted back a little however, ahead of the BOE and ECB rate announcements and the start of US trade.
Looking ahead, the key economic data as far as the base metals are concerned is the remaining Chinese data for May, including New Yuan Loans, Money Supply, Industrial Production, Fixed Asset Investment, Retail Sales and Inflation. The data will likely dictate the tone for Friday morning’s activity, with the key US Advance Retail Sales and Michigan Confidence numbers then setting the mood for the market ahead of the weekend.
The Chinese trade data showed a 9.1% m-o-m fall in imports of unwrought copper in May to 396.7kt, 6.1% lower in y-o-y terms. Scrap imports were also lower, coming in at 330kt, down 11% m-o-m but virtually unchanged y-o-y. Given the lack of arbitrage opportunities and the approach of the weaker summer demand period, lower imports were to be expected.
Concerns over the European sovereign debt crisis and government clampdown on property prices may also have had some bearing on the figures, though the full impact may only be seen in the June numbers.
However, with anecdotal reports suggesting that scrap supply in China has tightened up recently - with the price fall seeing scrap merchants hanging onto their inventory - it will be interesting to see if refined demand picks up over the coming weeks to compensate.
