Fears of new trade tariffs push industrial metals lower

September 17, 2018

London (Sept 17)  Prices of most industrial metals slipped on Monday, with copper and nickel the biggest fallers after reports that the United Sttes may be about to impose tariffs on another $200 billion worth of Chinese goods.

U.S. President Donald Trump is likely to announce the new tariffs as early as Monday. China has said it would retaliate. The tit-for-tat dispute has led to concerns that demand for metals will weaken and is the key factor driving prices lower, said Societe Generale analyst Robin Bhar.

"Fear (of more tariffs) is dominating the markets," he said.

COPPER: Benchmark copper on the London Metal Exchange was down 1.4 percent at $5,890.50 at 1056 GMT, near a 14-month low of $5,773 touched in August and down 20 percent from a high in June.

POSITIONING: Speculators are betting that prices will fall further, with the net short in LME copper at 17 percent of open interest, brokers Marex Spectron said. Investors have net short positions in all LME industrial metals, they said.

STOCKS: Prices are falling despite signs of a tighter market, with copper inventories in LME-registered warehouses at 221,925 tonnes the lowest since January.

CHINA ECONOMY: Weak economic data in China has exacerbated fears that demand will fall. China is the largest consumer of industrial metals.

CHINA PREMIUMS: Low prices are however tempting bargain hunters, with Chinese copper import premiums at $96 a tonne the highest since February 2016. CHINA PRODUCTION: Chinese production of copper rose to 749,000 tonnes in August, up 10.5 percent from the same month in 2017. Production of other metals also rose, though zinc output fell.

RUSAL: U.S. authorities said buyers of aluminium from Russia's Rusal before it was sanctioned in April could sign new contracts with the company, but did not say whether a deadline of Oct. 23 for U.S. customers to wind down business with Rusal would be extended.

ALUMINIUM SPREAD: The premium of three month aluminium over the cash contract is more than $35, the highest since late 2015, in part due to concerns that supply could tighten if sanctions on Rusal are not lifted.

OTHER METALS: LME aluminium was down 0.9 percent at $2,025.50 a tonne, zinc was 0.4 percent lower at $2,324, nickel fell 2.6 percent to $12,330, lead rose 0.2 percent to $2,042 and tin was down 0.7 percent at $18,910.


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