Home >Markets >Commodities >Copper dips ahead of fresh US-China trade talks

London: Copper prices slipped on Tuesday ahead of more US-China negotiations as investors moved to the sidelines because of uncertainty on the likelihood of a trade deal being struck.

A new round of talks between the United States and top metals consumer China take place in Washington on Tuesday to resolve a trade war that has weighed on metals prices for the past year.

Copper, regarded by many as a bellwether of the global economy because of its many industrial uses, has rebounded nearly 10% from an 18-month low hit on 3 January, partly on optimism about a trade deal.

"Maybe it's too optimistic, because any solution would be more like a symbolic deal. It would ease some of the tensions, but it would not really bridge all the gaps that exist between the US and China, which are much more deep rooted," said analyst Carsten Menke at Julius Baer in Zurich.

Hopes for further government stimulus has also buoyed prices of copper and other base metals, but that could also be unrealistic, Menke added.

"It looks like China is taking a much more granular approach, much less targeted and direct stimulus, and therefore much less metal intensive ... given these concerns about debt."

Julius Baer has a three-month target for copper of $6,150.

Benchmark copper on the London Metal Exchange was bid down 0.6% to $6,245 a tonne. Copper, failing to trade in official open outcry activity, was on course to snap a run of four straight daily gains.

■ Copper Spreads: The premium of cash copper over three-month copper spiked to $58 by Monday's close, the highest since January 2015 and up from $5 on Friday. The premium last traded at $22 on Tuesday.

Traders attributed that to a short-term squeeze linked to a large stocks position ahead of Wednesday's contract expiry. LME data showed one participant was holding 50-80% of on-warrant copper inventories, those not earmarked for delivery.

■ Malaysia Bauxite: Malaysia said it will not extend a moratorium imposed on bauxite mining on environmental grounds that expires on 31 March. Before the moratorium, Malaysia accounted for more than 40% of China's imports.

■ Aluminium: The move by Malaysia on bauxite, the raw material to make aluminium, weighed on aluminium prices on the Shanghai Futures Exchange, which ended down 0.2% at ¥13,430 a tonne. Three-month LME aluminium rose 0.3% to $1,862 a tonne in official rings.

"Not only is there a lack of fundamental support for the aluminium market, the cost support from bauxite may start to fade," Argonaut Securities analyst Helen Lau said in a note.

■ Prices: Zinc gained 0.2% to $2,643.50, lead was bid 0.4% down at $2,021, nickel rose 0.3% to $12,490 and tin was bid down 0.3% at $21,050.

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