Copper hovers near 2-week low as trade deal pessimism sets in

03 Jul, 2019

Benchmark copper on the LME closed up 0.5pc at $5,918 a tonne after slipping to $5,840, the weakest since June 18.

Investors fear protectionist trade policies will damage economic growth, weakening metals consumption.

Copper, used in power and construction, cost more than $7,000 a tonne in June last year before US President Donald Trump began his trade dispute with China.

Hopes that talks over the weekend had put the two countries on a path to a deal were fading, said ETF Securities analyst Nitesh Shah.

"From a fundamental standpoint, things are pretty good (for copper) ... If there weren't question marks over demand, the metal would be doing very well," he said.

MANUFACTURING: Data this week showed factory activity shrank across much of Europe and Asia in June and slowed to near a three-year low in the United States.

In China, the world's largest consumer of metals, the manufacturing PMI fell short of market expectations and was the worst since January.

SLOWING GROWTH: Other figures on Wednesday from China, the euro zone, Britain and the United States reinforced a picture of weakening economies.

STOCKS: Expectations that central banks will battle slowing growth with easier monetary policy drove US stocks to a record high, and gave some support to copper.

TRADE WAR: White House trade adviser Peter Navarro said trade talks with China were heading in the right direction, but a deal would take time.

But Trump said on Monday any deal would need to be somewhat tilted in favour of the United States, and a US official said Chinese company Huawei should still be treated as blacklisted.

COPPER STOCKS: Copper inventories in LME-registered warehouses jumped 32,575 tonnes to 272,500 tonnes, the highest in a year, suggesting a better supplied market.

TIN: LME tin ended up 3.5pc at $18,310 a tonne after plunging more than 6pc on Tuesday to the lowest in three years.

"The overall pattern of weak supply and demand remains unchanged," Citic Futures analysts said in a note, adding that Chinese tin smelters were losing money at these price levels.

TIN STOCKS: LME inventories have risen from a record low below 1,000 tonnes in May to 6,410 tonnes, the highest in two years but far below peaks a decade ago.

SPREADS: LME cash tin has flipped from a more than $300 premium to the three-month contract in May to a discount of $7 on Wednesday, pointing to more plentiful nearby supply.

OTHER METALS: LME aluminium finished up 0.5pc at $1,790 a tonne and nickel rose 2.1pc to $12,350. Zinc fell 1.2pc to $2,449 and lead closed down 0.8pc at $1,880.

Copyright Reuters, 2019

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