Base Metals: All eyes on China, rather than the US – Commerzbank

The Chinese data to be released over the next two weeks is likely to be decisive for base metals, Commerzbank commodity strategist Barbara Lambrecht notes.

A part of the sentiment on China is already priced into base metals

“More so than Monday's inflation data, Tuesday's foreign trade data is likely to be particularly important. In addition to exports of Aluminum and Steel products, the focus will be on imports. While imports of Copper ore have recently weakened somewhat, which could also be due to seasonal factors, imports of iron ore have been rising steadily.”

“However, given the recent decline in steel production and the continued build-up of inventories in Chinese ports, we continue to expect imports to decline in the near term. A look at Australian exports in July suggests a decline in August, at least from that side. The focus will also be on the Chinese credit growth figures, which will be released later this week.”

“Credit growth figures have been weak in recent months, with the most recent figure showing credit growth of only around 8%, the slowest on record. If the figures disappoint again, this is likely to continue to weigh on sentiment and expectations for the future development of China's construction and manufacturing sectors. All in all, a good part of the negative sentiment on China is likely already priced into base metals. Positive surprises are therefore likely to have a greater impact on prices than further weak data.”