Collective concern about what exactly is happening in the world’s second-largest economy is roiling all parts of the financial universe.

But industrial metals, which first felt the chill winds from China, may offer some light in the current gloom and doom.

Few saw the January bear raid on copper coming. Sure, copper prices had been trending lower for four years from their peak above $10,000 per tonne in early 2011. But the narrative was all about supply, as the world’s copper miners gradually lifted output after years of collective underperformance and lack of investment in new capacity.

The story was the same for iron ore, with slumping prices attributed to a wall of new supply being brought on by both majors, Rio Tinto and BHP Billiton, and a host of new players.

No one was that worried about actual demand, first and foremost in China. A mild slowdown was expected.

How could it not be, given Beijing’s mantra of steering the economy away from fixed asset investment to a more sustainable consumer model?

A harder slowdown

But most commentators, and crucially, most producers, took a sanguine view that China would continue sucking up ever greater quantities of raw materials, just at a slightly slower pace.

It took a while for the narrative to catch up with what those Chinese funds were betting on back in January, namely that the slowdown was going to be a lot harder than most expected.

Consider, for example, a market such as stainless steel, a high-end alloy that sits much closer to the end-user than the producer on the supply chain.

Chinese production of stainless fell by 1.4 per cent year-on-year in the first quarter of 2015.

That may not sound much, but Chinese output had been growing at double-digit rates over the preceding five years. The last quarter in which the country’s output actually fell was back at the start of 2009, when global manufacturing was still spiralling downwards in the wake of the global financial crisis. In that context, a contraction of ‘only’ 1.4 per cent feels very hard.

And, since China’s share of global stainless production had grown steadily from 29 per cent at the end of 2008 to 55 per cent at the end of 2014, the shock waves have travelled far beyond China’s own borders.

Look no further, by the way, to understand why the price of nickel, the key alloying agent in stainless steel, has bombed despite structural supply issues after Indonesia’s January 2014 ban on exports of nickel ore. From the perspective of any metals trader, the current fixation on China’s tricky balancing act between re-engineering its economy while not losing too much growth momentum is not news at all.

All that has really changed is the broader deterioration of sentiment, a phenomenon that has evidently not been helped by Chinese policymakers’ panicky response to imploding local stock markets.

Sentiment is itself a powerful driver. But the irony is that having already been battered by their own micro Chinese ‘hard landing’ in the first six months of this year, metal markets are showing signs of stabilising, albeit with heightened volatility.

Iron ore trades at around $53 per tonne, compared with July’s historic low of $44.10. Base metals, first and foremost copper, are displaying increased spread tension, putting traders on alert for a reaction to the recent waves of selling.

Manufacturing apocalypse

The obvious historic pricing reference point is the global financial crisis of 2008-2009, but there is no sign of a manufacturing apocalypse. Not even in China.

China’s import volumes may have dropped a little, but are still robust. Iron ore imports were down just 0.1 per cent in the first seven months of this year. Those of refined copper fell a bit harder by 9 per cent but, then, imports of copper concentrates rose 11 per cent, simply meaning China is capable of producing more of its own metal than it used to be.

Imports of refined nickel, by the way, were the second-strongest ever in July despite weakness in the stainless steel sector.

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