Copper slips on U.S.-China concerns, but vulnerable to squeeze

• Three-month copper on the London Metal Exchange failed to trade in official open-outcry activity but was bid down 0.6pc at $5,687.50 a tonne.
• "This makes them vulnerable to a squeeze higher in case a truce between the U.S. and China is reached."

LONDON: Copper prices slipped on Tuesday as investors feared that U.S.-Chinese trade talks would make little progress, but the metal was vulnerable to a squeeze higher due to heavy bearish positions, an analyst said.

Washington blacklisted Chinese companies over Beijing's treatment of predominantly Muslim ethnic minorities while President Donald Trump said a quick trade deal was unlikely.

"The consensus remains sceptical about a resolution, but a mini-deal, just on tariffs, might be a concrete expectation," said Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan.

"The risk-reward now points to the upside for copper and aluminium in particular because the short positioning is elevated," he said.

"This makes them vulnerable to a squeeze higher in case a truce between the U.S. and China is reached."

The net speculative short position for LME copper has risen to 12pc of open interest, the highest in a year, while for LME aluminium it has climbed to 31pc, according to estimates by Marex Spectron, the broker's Alastair Munro said in a note.

Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, will begin trade talks in Washington on Thursday, the first minister-level negotiations in several months.

Three-month copper on the London Metal Exchange (LME)  failed to trade in official open-outcry activity but was bid down 0.6pc at $5,687.50 a tonne, trimming gains of 1.4pc in the previous session.

ANTOFAGASTA: Chile's Antofagasta has requested government mediation to resolve a contractual dispute with supervisors at its flagship Los Pelambres copper mine, the supervisors' union said.

COPPER SPREAD: The discount of LME cash copper to the three-month contract increased to $36.90 a tonne by Monday's close, the highest since August 2018, indicating plentiful supplies in the LME system. It was last at $36.65 on Tuesday morning.

NICKEL STOCKS: LME nickel inventories continued to fall on Tuesday to 117,522 tonnes, the lowest since August 2012.

Three-month LME nickel fell as much as 3.3pc to a one-week low of $17,135 a tonne, but later pared the losses to a bid of $17,470 in official activity, a decline of 1.4pc. It slipped for a second day after jumping 3.4pc last week amid a drawdown in stocks.

PRICES: LME aluminium was bid down 0.5pc in official rings at $1,738 a tonne, zinc shed 0.7pc to trade at $2,273.50, lead lost 0.6pc to a bid of $2,176, while tin added 0.7pc to trade at $16,445.