Escalating US-China trade dispute hits copper prices
LONDON: Copper prices slid on Monday after President Donald Trump threatened to slap tariffs on virtually all Chinese imports into United States, escalating the trade dispute and fuelling fears of weaker demand for industrial metals.
Benchmark copper on the London Metal Exchange was down 1 percent at $5,873 a tonne at 1054 GMT, a loss of around 20 percent since hitting a 4-1/2 year high at $7,348 in June. It crashed to a 14-month low of $5,773 on Aug. 15.
"The trade dispute is not going to disappear. The market still does not fully understand this and has not completely priced this in," said Commerzbank analyst Eugen Weinberg, adding that he expects to see larger losses.
"If a large proportion of Chinese exports to the U.S. are subject to penalties, there will be a massive impact on trade flows and it will probably change companies' investment plans."
TARIFFS: Trump on Friday threatened duties on another $267 billion of goods on top of $200 billion in imports primed for levies in coming days.
The move would sharply escalate Trump's trade war with Beijing over his demands for major changes in economic, trade and technology policy. China will respond if the United States takes any new steps on trade, the foreign ministry said on Monday.
Wood Mackenzie estimates the expansion of the list to $200 billion could raise the impact to around 1 percent of total Chinese copper demand, as many copper intensive goods are included in the extended list.
SURPLUS: China's trade surplus with the United States widened to a record in August even as its export growth slowed slightly, an outcome that could push Trump to turn up the heat on Beijing.
CHINA: China is the world's largest consumer of copper, accounting for nearly half of global demand estimated at around 24 million tonnes this year.
COPPER: China's imports of copper fell 6.7 percent from a month ago to 420,000 tonnes in August, data from the General Administration of Customs showed.
LEAD: A large holding -- between 50 and 79 percent -- of cash contracts and warrants is creating some nervousness about shortages on the LME market ahead of seasonally strong demand from battery makers.
DOLLAR: The softer U.S. currency helped support prices of industrial metals, as it makes dollar-priced commodities cheaper for holders of other currencies.
PRICES: Aluminium was down 1 percent at $2,049 a tonne, zinc fell 0.9 percent to $2,397, lead slipped 0.4 percent to $2,070, tin rose 0.3 percent to $19,110 and nickel was unchanged at $12,355.