Copper:  Weak China Industrial Data Weighs

Written by James Harte from Orbex

Copper prices continued to sell-off this week weighed upon by a stronger US Dollar in response to the strengthening of Clinton’s lead in the election polls following another win in the final debate.  The sell-off comes despite better data from China recently which has warded off concerns that Chinese growth is slowing.

3Q GDP for the world’s second-largest economy grew in line with estimates at 6.7%, and retail sales were firm at a solid growth rate of 10.7% year over year. The data shows that China is maintaining Beijing’s economic growth target of 6.5% – 7%.  Despite some positive prints, downside pressure was put on the metals complex as Industrial Production was shown to have slowed to 6.1% from 6.3% year over year.  With China consuming around 40% of the world’s copper supply and weakness in industrial and manufacturing data tends to weigh on the metal which is still suffering from sizeable oversupply globally.

There are some signs of disruption to the copper market however with the killing of a protestor at MMG’s Las Bambas copper mine in Chile. Chilean regulators announced that they are pursuing charges against the mine’s owner which could threaten the future of the project in the world’s largest copper producing nation.

Looking at volume measures over the course of the decline from the 10th October high suggests that selling momentum is building with open interest having jumped nearly 10% on the way down.

Copper prices are now challenging the supporting trend line of the large contracting triangle pattern which has framed price action this year. A break here opens up a run down to deeper support at the June lows around 2.02/2.04

Iron Ore: Fortescue Forecast Further Price Drop

Fortescue Metals this week reported that they forecast Iron ore prices to decline further heading into 2017 as the market braces for additional supply from Australia and Brazil.  One of the new mines coming into the market is the 55mion tonne Roy Hill mine in Australia which, already in production, is expected to reach peak output next year.

In contrast to this the world’s largest mining company BHP Billiton reported their iron ore production fell 6% over the first quarter due to a rail maintenance program disrupting Brazilian operations.

Iron ore prices are now holding below the bullish trend line support which had underpinned price action this year. The next key support comes in at the April and June lows around 407.

Aluminium: Increased China Output Weighs On Prices

Aluminium fell to a three-week low fuelled by an increase in Chinese output. Total Chinese production in September was 2.75mio tonnes, up from 2.713 mio tonnes in August according to the International Aluminium Institute. This data marks the highest Aluminium production in 15 months which has re-ignited oversupply fears. Alongside the data, LME warehouses in Asia, mostly Korea, also reported over 77k tonnes of aluminium had arrived in warehouses over two days this week.

Aluminium is moving lower within the broad bullish channel which has framed price action this year. The next key support will be a challenge of the rising trend line support running from December 2015 lows.

Platinum: Strike Concerns Subside

Platinum prices stabilised this week, stemming the declines that have marked price action over the last few months. The stall in downside momentum suggests that markets are becoming less concerned with the potential for workers’ strikes in South Africa. Members of the NUM at Implats have agreed upon a two-year wage deal. Amplats is set to recommend a deal to its workers on Saturday, October 22nd.

Platinum prices broke down below key structural support at the May low but have now found support at the April low around 939.Whilst bearish pressure remains on the metal, a recovery above the May low around 960 will be needed to ease downside bias.