Copper advances on China inflation data, record high imports

Copper advanced in early European trading on Monday after Chinas National Bureau of Statistics reported that the Asian countrys consumer inflation advanced in September above analysts expectations, while producer inflation declined less than expected. The positive numbers offset downbeat trade data over the weekend and the continuing fiscal deadlock in the U.S.

On the Comex division of the New York Mercantile Exchange, copper futures traded at $3.292 per pound at 8:47 GMT, up 0.71% on the day. The metal fell to a session low of $3.245 per pound in Asian trading but rebounded to days high of $3.298 after the release of Chinas consumer and producer inflation. The industrial metal rose by 0.8% on Friday but settled the week 0.9% lower after it shed 0.6% in the preceding five-day period.

Copper surged to positive territory after swinging between gains and losses as Chinas National Bureau of Statistics reported inflation picked up in September, offsetting downbeat trade data released on Saturday. Year-on-year, consumer inflation rose by 3.1% from 2.6% in August, exceeding analysts’ projections for a 2.9% increase. On a monthly basis, China’s Consumer Price Index advanced by 0.8%, beating both expectations and last month’s reading of 0.5%. Producer inflation declined by 1.3% after it fell by 1.6% in August, outperforming projections for a 1.4% decrease.

This comes after the General Administration of Customs reported on Saturday that the Asian country’s outbound shipments fell by 0.3% in September, sharply confounding analysts’ expectations for a 6.0% increase. This was the worst performance in three months. Imports rose by 7.4%, exceeding forecasts for a 7.0% increase, which narrowed down China’s trade balance surplus to $15.2 billion from $28.61 billion in August. Economists expected the nation’s trade balance to equal $27.7 billion.

A strengthening of the national currency reduces a country’s competitiveness on the international markets as it makes domestic products more expensive for foreign currency holders. Shipments were further hurt by reduced economic activity due to the Mid-Autumn festival in the middle of September.

The report fanned some concern over the country’s economic growth prospects and added to Premier Li Keqiang’s challenges to maintain an expansion above 7.5%, something which he earlier pledged to defend. Adding to the concern, the International Monetary Fund trimmed its global growth forecast for this year to 2.9% earlier in the week, down from previously estimated at 3.1% in July. Next year’s projection was cut to 3.6% from July’s prediction for 3.8%.

The metals demand prospects were also hurt after U.S. lawmakers failed to reach an agreement over the weekend on raising the nations debt ceiling and reopening the partially shut federal government. Senators Harry Reid and Mitch McConnell sat down face to face on Saturday for the first time since July after talks between House Republicans and the White House failed. They both described their discussions as “constructive” but “very preliminary”.

Talks to avoid a U.S. sovereign debt default showed some signs of progress on Sunday but there were still no guarantees for an end to the fiscal deadlock. Despite the Columbus Day federal holiday, both the Senate and House of Representatives are scheduled to be in session on Monday.

Xu Liping, an analyst at HNA Topwin Futures Co. in Shanghai, said for Bloomberg: “Investors expected American lawmakers to reach an agreement and they disappointed again. In China, the September economic figures show that it’s no easy matter to have a sustained recovery in demand.”

Record high copper imports however added some positive sentiment. Chinese Customs said that copper imports rose by 18% to 457 847 tons in September from a month earlier as lower prices boosted orders. This was the highest level since March 2012. Total inbound shipments surged to 1.26 million tons in the third quarter, 21.4% above the preceding period.

Market players are awaiting the release of key Chinese economic data on October 18. China’s National Bureau of Statistics will likely report that the country’s economy grew by 1.9% in the third quarter, up from 1.7% in the previous three months. The median forecast of 21 analysts surveyed by Reuters showed that year-on-year China’s economy has expanded by 7.8% in the third quarter, up from 7.5% in the previous period.

The national agency is also due to release the country’s retail sales which likely inched up to 13.5% in September from 13.4% in the preceding month. Industrial production is projected to have expanded by 10.1%, slightly below August’s 10.4% advance.