Copper drops as China prepares to fight back against US tariffs

15 Aug, 2019

Some other industrial metals, however, clawed higher in thin volumes as investors closed out bearish positions.

China has to take necessary counter-measures to the latest US tariffs on $300 billion of Chinese goods, the finance ministry said on Thursday.

The macroeconomic situation remains bad despite hopes in some quarters for more stimulus to stabilise China's economy further, said Gianclaudio Torlizzi, partner at the T-Commodity consultancy in Milan.

"In the very short term we could see some more downside as long as the macro doesn't improve," he said. "But if you have a longer-term view, we are approaching nice buying areas for the big metals. It's a nice opportunity to get some exposure."

Metals fell on Wednesday after an inversion of US government bond yields on Wednesday sparked fears that the world's biggest economy would sink into recession, dragging the rest of the globe with it.

Benchmark copper prices on the London Metal Exchange were down 0.5pc at $5,737 a tonne by 1015 GMT, nearing a two-year low of $5,640 reached earlier this month and after closing 1.1pc down on Wednesday.

CHINA PROPERTY: Prices of new homes in China rose in July but the year-on-year growth of 9.7pc was the weakest so far this year. The construction industry is one of the biggest consumers of industrial metals.

COPPER STOCKS: Copper inventories in LME-registered warehouses jumped 11pc, or 29,950 tonnes, to 301,750 tonnes, indicating healthier short-term supplies.

NICKEL SPREADS: LME cash nickel flipped to a premium of $13 a tonne over the three-month contract by Wednesday's close.

That was the strongest premium since mid-May and up from a discount of $11 a day earlier.

This indicates near-term shortages of metal in LME warehouses, which could be exacerbated by one party holding 50pc-80pc of available nickel LME inventories, LME data showed.

LME three-month nickel rose 0.6pc to $16,040 a tonne after hitting a 16-month high last week on concerns over supply disruption in Indonesia.

ALUMINIUM: LME aluminium edged up 0.1pc to $1,777 a tonne amid ongoing concerns about disruptions after floods in the smelting heartland of China's eastern province of Shandong.

PRICES: LME zinc rose 0.8pc to $2,274 a tonne, lead added 0.3pc to $2,048 and tin fell 1pc to $16,955.

Copyright Reuters, 2019

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