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Markets

Copper firms as U.S.-China trade talks move into focus

The metal used in power and construction logged its third straight week of declines last week after soft economic d
07 Oct 2019
  • The metal used in power and construction logged its third straight week of declines last week after soft economic data sparked fears that the trade war would hit global economic growth.
  • Copper edged higher on Monday ahead of a fresh U.S-China trade talks this week but reports that China was reluctant to agree to a wide-ranging deal tempered hopes for a speedy resolution.

JOHANNESBURG: Copper edged higher on Monday ahead of a fresh U.S-China trade talks this week but reports that China was reluctant to agree to a wide-ranging deal tempered hopes for a speedy resolution.

Benchmark copper on the London Metal Exchange (LME) gained 0.4pc to $5,668 a tonne in official trading rings.

The metal used in power and construction logged its third straight week of declines last week after soft economic data sparked fears that the trade war would hit global economic growth.

Bloomberg reported at the weekend that Chinese officials are signalling increasing reluctance to agree to a broad trade deal pursued by U.S. President Donald Trump.

Officials from the world's two largest economies will meet in Washington over Oct. 10-11.

"It's hard to be optimistic that a deal could be reached given the pronouncements over the weekend," said Capital Economics senior commodities economist Caroline Bain.

"We have been here before, where ahead of the talks there is always a lot of optimism but nothing materialises."

TRADE NEGOTIATIONS: Trump said his administration had a "very good chance" of agreeing a trade deal and White House economic adviser Larry Kudlow said the U.S. team was "open-minded" about the outcome of this week's talks. .

COPPER INVENTORIES: On-warrant inventories of copper in LME-registered warehouses slipped 675 tonnes to 194,200 tonnes, having grown by 33,000 tonnes last week.

COPPER SPREAD: LME copper remained in a deep contango, indicating plentiful supply. The discount of LME cash copper to the three-month contract was at $35 a tonne, the biggest discount since August 2018.

POSITIONING: Hedge funds and money managers raised their net short positions in COMEX copper by 10,086 contracts to 62,741 in the week to Oct. 1, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

U.S DATA: The U.S. unemployment rate dropped close to a 50-year low of 3.5pc in September, lifting metals prices.

Copper prices have been caught between the balancing influences of falling supply and weakening global demand, especially in biggest user China.

LEAD: LME lead rose to its highest since July 2018, at $2,184.50 a tonne, with the spread for cash lead over the three-month contract rising to a premium of $3 a tonne after staying in discount territory for more than three weeks.

Benchmark lead was bid up 0.9pc to $2,179 a tonne.

OTHER METALS: Aluminium shed 0.3pc to $1,714 a tonne in official rings, zinc was bid 0.2pc higher at $2,304, tin rose 0.5pc to $16,550 and nickel was bid down 0.1pc to $17,800.