Escalating trade war keeps copper pinned at 5-month lows

  • Benchmark copper on the London Metal Exchange was down 0.3% at $5,826 per tonne in official trading rings
  • Aluminium traded at $1,776 per tonne in official rings, lead jumped 1.4% to $1,835, tin slipped 1.2% to $18,925

London: Copper prices hovered near a five-month low on Tuesday as an escalation of the US-China trade war reinforced concern about demand for industrial metals, while the weaker dollar weaker provided some suppport.

China on Tuesday warned its companies operating in the United States could face harassment from US law enforcement agencies.

It also rebuffed US criticism of a trade white paper as "singing the same old tune".

"There are fears that the US-China trade war will dampen the global economy and that it might fall into recession," said Commerzbank analyst Daniel Briesemann.

"These macro factors are in play even if fundamentals may be pointing to higher prices."

Benchmark copper on the London Metal Exchange (LME) was down 0.3% at $5,826 per tonne in official trading rings.

Copper, seen by investors as a gauge of economic health, touched $5,801 on Monday - its lowest at since 4 January.

Demand: China accounts for nearly half of global copper consumption estimated at 24 million tonnes. The United States accounts for about 8%.

Dollar: Expectations the US Federal Reserve would soon cut rates weighed on the US currency, which when it falls makes dollar-denominated commodities cheaper for holders of other currencies, potentially boosting demand.

Inventories: Copper stocks in LME-registered warehouses inched down to 211,775 tones and have shot up 67% so far this year. The increase in stocks has led to a widening of a discount to $26 a tonne for the cash contract against the three month.

Spreads: The tightness in the LME market has kept cash zinc at around a premium of around $140 over the three-month contract.

Zinc inventories: Zinc stocks registered with SfHE rose 5.4% to 59,351 tonnes, according to a weekly tally on Friday.

But inventories are still down 54% from a 2019 high of 124,038 tonnes in March.

Stocks in LME-monitored warehouses sit at 100,375 tonnes, and are down about 22% so far this year.

Zinc prices touched a January low of $2,448 per tonne, later edging up 0.6% to $2,484 per tonne in official rings.

Prices: Aluminium traded at $1,776 per tonne in official rings, lead jumped 1.4% to $1,835, tin slipped 1.2% to $18,925 and nickel fell 1.7% to $11,850 a tonne.

Close