Weak China Export Data Prompts Sell-Off for Iron Ore and Copper Miners

Michael Teague |

Stocks were trading lower from the outset of Monday’s trading session as investors were unnerved by Chinese trade data released on March 8. The data indicated that exports out of the world’s number-two economy declined by over 18 percent compared to February of 2013, a far cry from the 7.5 percent increase that economists had been expecting.

The SPDR S&P Metals & Mining ETF (XME) that replicates the performance of the index of the same name was off by over two percent shortly before the closing bell in reaction to the news, as copper futures were off by nearly 2 percent. The spot price for iron ore took a hit as well, shedding over 8 percent for the metal’s largest single-day decline in nearly 5 years.

China’s economy has been a growing concern as a decade of rapid expansion appears to be cooling off, and metals producers have been bracing themselves for lower iron ore and copper prices for some time. But while February’s export data is just the most recent in a series of indicators reflecting the new growth environment, it is also the most worrisome to date.

As the spot price for iron ore fell to $104.70 per tonne, it’s lowest since late 2012. Copper futures for delivery in May were off by 1.5 percent to $3.04 per pound, many industrial metals producers were watching their shares sell off on volume well above their respective 3-month averages.

Canada’s Turquoise Hill Resources Ltd. (TRQ) had been on a tear, adding about 20 percent in the current quarter, but was off nearly 3 percent to under $4 per share on 2.5 times average volume. The $4 billion company’s main project is the Oyu Tolgoi copper and gold mine in Southern Mongolia.Turquoise’s parent company, UK-based industry giant Rio Tinto plc (RIO) , who sells a great deal of its iron ore to China, was also off nearly 3 percent to just under $52 per share on 1.5 times normal activity.

US-based Cliff’s Natural Resources (CLF) , often thought of as a coal company despite the fact that the vast majority of its overall output consists of iron ore, for its part was off by 5 percent to $17.75 per share on 1.5 times volume. The company has had a rough 2014 as it is, with the stock losing some 30 percent of its share-price on the year, prompting activist shareholders to force a breakup of the business despite the fact that most of its operations are substantially exposed to the Chinese economy.

Other heavy hitters were also suffering in Monday’s session, with the mighty BHP Billiton Ltd. (BHP) off by 3 percent to $64.70, Vale S.A. (VALE) also off by 3 percent to $12.65, and Alpha Natural Resources (ANR) down over 4 percent to $4.60.

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Companies

Symbol Name Price Change % Volume
TRQ Turquoise Hill Resources Ltd. 3.52 -0.02 -0.56 2,436,821
VALE VALE S.A. American Depositary Shares Each Represen 8.78 -0.16 -1.79 26,109,176
BHP BHP Billiton Limited 38.48 -0.42 -1.08 2,059,742
CLF Cliffs Natural Resources Inc 9.93 -0.44 -4.24 20,117,197
IPHXF Phoenix Holdings Ltd 3.19 0.00 0.00 0

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