Nothing seems to matter in copper markets, except the trade war

Here's a sign of how all-dominating the trade war has become in metals markets: Copper is slumping toward a three-month low even after Zambia moved closer to nationalizing some of its mines.

The lack of a reaction is even more surprising when compared with other market moves. Zambia's Eurobond yields surged to a record high and the currency hit a 3 1/2-year low.

Zambian President Edgar Lungu is escalating a spat with miners including Vedanta Resources Ltd. and Glencore Plc over the share of royalties the country collects from the extraction of its vast reserves of copper. On Monday, the government filed notification of plans to take over Vedanta's domestic copper assets.

Nationalizing the assets raises the risk of possible disruptions in an already tight copper market, according to Colin Hamilton, the managing director for commodities research at BMO Capital Markets.

"This might prompt people to revise down supply, but right now there's much more of a focus on the downward revisions on the demand side if the trade war escalates," Hamilton said.

Given some historic U-turns on Zambia's mining policy in recent years, investors may also be pricing in the possibility that the government will step back from the brink and strike a deal with miners, he said.

Vedanta's investors appeared to be taking a similarly sanguine view. The company's shares closed almost 4% higher in India.

(By Mark Burton)