LONDON: Copper lost ground on Monday as the Strait of Hormuz closed to marine traffic once more and a fragile ceasefire between Iran and the United States looked in jeopardy, reigniting fears over economic growth.
Benchmark three-month copper on the London Metal Exchange was down 0.8percent at USD13,235 a metric ton in official open-outcry trading. The metal had gained 3.9percent last week on optimism that the ceasefire might hold and Iran’s declaration on Friday that the Strait had been reopened to commercial vessels.
However, the US then seized an Iranian cargo ship that tried to run its own blockade of the strait and Tehran vowed to retaliate, refusing for now to join further peace talks.
The dollar strengthened, making dollar-denominated metals more expensive for holders of other currencies, weighing on prices. LME copper stocks, meanwhile, remain near a 12-year high at almost 400,000 tons.
Resilient demand in top metals consumer China, however, helped to limit the downside. Copper stocks in Shanghai Futures Exchange warehouses fell 9.8percent week on week to 240,456 tons on Friday and are down nearly 45percent since March 13.
Elsewhere, aluminium fell 0.4percent to USD3,552 a ton, extending a 2.2percent drop on Friday when the reopening of the Strait of Hormuz eased supply fears.
Primary aluminium production in the Gulf last month fell by 6percent from February, preliminary data from the International Aluminium Institute showed on Monday, with a warning that the fall could be even steeper when final numbers are in.
“Positioning and risk (are) so much reduced across the metals arena amid that conflict between production issues versus recessionary threats and demand destruction,” broker Marex wrote in a note.
Zinc eased 0.3percent to USD3,436 a ton, lead also slipped by 0.3percent to USD1,957 and tin was down 0.7percent at USD50,330. Nickel was the only base metal to rise, gaining 0.3percent to USD18,165 as fears over sulphuric acid shortages hit local producers, which have also warned that a new ore pricing formula will increase production costs significantly.
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