METALS : Copper Falls on Global Trade Jitters

By David Hodari and Benjamin Parkin

Mounting tension between the U.S. and China pressured copper prices on Wednesday, as traders bet that disruption to trade could endanger global growth.

China consumes around half of the world's copper, making prices for the industrial metal highly sensitive to the perceived fortunes of its economy. Analysts say a trade war between Washington and Beijing could hurt growth both there and globally, which would damp demand for copper.

"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.

Cooper contracts for July delivery fell 0.3% to $3.0525 a pound at the Comex division of the New York Mercantile Exchange.

The selling started after Asian equities tumbled overnight. Prices on Wednesday morning were well off the low of $3.01, however, with a weaker U.S. dollar sparking some buying interest.

The WSJ Dollar Index, which measures the currency against a basket of 16 others, fell 0.4% to 87.19, eroding its recent gains. A weaker dollar means less expensive dollar-denominated commodities for holders of other currencies.

The White House said earlier this week 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 it 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.

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 potentially supportive factors, with the Indian state of Tamil Nadu earlier this week ordering Vedanta Resources to close a copper smelter that produced 400,000 tons of metal a year.

Gold prices were slightly higher on Wednesday, lifted by the dollar. The precious metal has recently become more sensitive to the value of the greenback than to geopolitical uncertainty, analysts say, undermining its typical role as a safe-haven asset.

June contracts rose 0.1% to $1,300.50 a troy ounce.

Write to David Hodari at [email protected] and Benjamin Parkin at [email protected]