Base Metals: Copper import by China rises by 23%

The base metals embarked on another rollercoaster ride over the past 24 hours, with an aggressive sell-off yesterday afternoon being followed by a bounce back this morning. The trigger for yesterday’s sell-off was variously put down to equity markets, the FX markets, or a case of buy the rumour/sell the fact with regards to news of strike action at Spence.

Either way, stops were triggered in Aluminium and Copper, and, with much of the market tied up in LME week meetings and functions prices fall sharply on light liquidity. The other base metals followed copper and aluminium lower. Volumes built up significantly during the move however, particularly in aluminium and copper, with both metals seeing well over 10,000 lots trade on LME Select.

This morning has seen prices recover, helped by a weaker dollar and positive Chinese economic data and import figures. In particular, China’s money supply continued to increase strongly, exceeding expectations, while the country’s exports fell by 15.2% y-o-y, the least amount in 9 months and significantly better than consensus expectations of a 21% y-o-y decline.

Workers at BHP Billtion’s Spence mine started strike action on Tuesday after workers rejected a pay offer from the company.

News of the strike action at the 180 ktpy capacity mine had no impact on prices, and may have even triggered the sell-off as
buy the rumour/sell the fact activity emerged. In other news, an in contrast to Spence, workers at Escondida have voted in
favour of the company’s wage offer.

Price-wise, copper has recovered from yesterday’s fall, shaking off a 4,825 mt increase in on-warrant stocks to climb back above $6,200 heading into the afternoon. Of interest, the main location for the stock increase was Busan, up 3,900 mt.

Meanwhile, Chinese imports of copper increased in September, with unwrought copper imports climbing 23% m-o-m to 399,052 mt.

Imports had been declining over the past 2 months, so the increase appeared to take the market a little by surprise. Aluminium has struggled heading into he afternoon, falling below $1,900, in spite of a 9,875 mt fall in available LME stocks. The main reason for the fall in on-warrant stocks was a 8,350 mt jump in cancelled warrants in Asian warehouses.

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