Copper Slips After U.S. Move on Tariffs

By David Hodari

LONDON--Copper prices slipped on Wednesday, falling along with Asian equities markets after the White House's decision to move forward with tariffs against China threatened to derail trade talks scheduled for this weekend.

The price of copper was down 0.37% at $6,802 a metric ton in late morning trade. While it had reversed some of its earlier losses, the metal was still 1% down from its level 24 hours earlier.

Gold, meanwhile, inched 0.03% higher to $1,299.30 a troy ounce, with traders unperturbed both by the tariff threats and by political turbulence in Italy that raised questions about the country's continued membership in the eurozone.

In the base metals complex however, the trade tensions as well as the situation in Italy appeared to be counterbalancing any beneficial effects of weakness in the U.S. dollar.

The WSJ Dollar Index, which measures the currency against a basket of 16 others, was last down 0.4%, eroding its five-day gains to just 0.1%. A weaker dollar means less expensive dollar-denominated commodities for holders of other currencies.

The White House said Tuesday that it would announce by June 15 a final list of $50 billion in imports from China that would be subject to tariffs of 25%, with the duties implemented "shortly thereafter."

Those tariffs are the first in a package that the White House said could lead to tariffs on a total of $150 billion in Chinese imports.

In response, China's Commerce Ministry said it would defend its "core national interests."

Those developments, combined with unfolding political drama in Europe and sluggish economic data out of the eurozone in the most recent month, were unsettling copper investors, analysts said.

While most base metals had pared their overnight losses, "assumptions of synchronized growth have been baked into prices since late 2017 and base metals are doing what they do what they do when there is any risk of derailed global growth," said Oliver Nugent, a strategist at ING.

Trade jitters were provoking high volumes on the London Metal Exchange, with early trading at 133% of the 20-day average turnover, according to Alastair Munro, a broker at Marex Spectron.

LME inventories have also now slipped for eight straight days, in a move which would normally boost prices.

Traders also appeared to be ignoring other bullish news, with the Indian state of Tamil Nadu earlier this week ordering Vedanta Resources to shutter a copper smelter which produces 400,000 tons of metal a year.

Copper prices have fallen in recent months, and they will need to rally soon if they are to hit the symbolic $7,000-a-ton level, ING's Mr. Nugent said.

"Copper needs physical tightness if we are to get back to $7,000. Europe goes on holiday in July so it's a now-or-never moment for copper traders unless they want this year to be a dull one for prices," the strategist said.

Among precious metals, silver was flat at $16.42 a troy ounce, platinum was down 0.11% at $905.50 a troy ounce and palladium was down 0.34% at $978.70 a troy ounce.

Among base metals, aluminum was up 0.35% at $2,277 a metric ton, zinc was up 0.05% at $3,080 a metric ton, nickel was up 0.1% at $14,860 a metric ton, tin was up 0.02% at $20,495 a metric ton and lead was up 0.29% at $2,437 a metric ton.

Lingling Wei contributed to this article.

Write to David Hodari at [email protected]