LONDON: Copper fell on Thursday as optimism about a 90-day pause agreed by Beijing and Washington on most of their retaliatory tariffs started to fade and concerns about longer-term demand prospects returned.
Benchmark three-month copper on the London Metal Exchange (LME) fell 0.9% to $9,523 a metric ton in official open-outcry trading. The metal, used in power and construction, had five previous sessions of growth and touched $9,664, its highest since April 2, on Wednesday.
“Industrial metals have woken up to the fact that a lot of damage has already been done, both to the US but especially the Chinese economy, and it raises renewed concerns about the demand outlook going forward,” said Ole Hansen, head of commodity strategy at Saxo Bank. “We have to remember it’s a trade tariff truce and not a final deal with many potential obstacles still lurking.”
Analysts at Citi said in a note that average copper prices were expected to fall to $8,800 in the third quarter from $9,300 in the current quarter as frontloading of trade and manufacturing spurred by the 90-day reprieve would fade.
“Trade tariffs remain notably higher than pre-April, even with recent and potential further bilateral deals, and we expect to see the impact on growth and payback for frontloaded goods trade in physical metals consumption by the third quarter,” Citi added.
Copper prices outside the US are for now supported by demand for supplies to the US where the premium on COMEX copper futures over the LME benchmark is elevated due to Washington’s ongoing investigation into potential new import tariffs on the metal.
An announcement of tariff implementation is likely to trigger an unwind through drawdown of the US domestic copper inventory, driving a temporary collapse in US import demand, Citi added.
Aluminium fell 1.8% to $2,482 a ton in official activity. The short-covering which was supporting the metal on Wednesday has worn off, shifting the focus back to slowing economies, said a metals trader. Weakness in aluminium demand linked to trade tensions will likely weigh on prices this year, but a longstanding cap on Chinese output could limit losses, analysts said.
Comments
Comments are closed for this article.