Copper prices fell on Monday, pressured by nervousness about the damage to growth and demand from the U.S.-China trade dispute and receding expectations of lower U.S interest rates.
Benchmark copper on the London Metal Exchange (LME) was down 0.1% at $5,814 a tonne by 1019 GMT. Prices of the metal used widely in power and construction hit a five-month low of $5,740 a tonne earlier in June.
“Fears of decelerating global growth and recession because of the trade war have hit sentiment in the mining sector,” said Bernstein analyst Paul Gait. “The risk-off malaise is what we are seeing in copper.”
TRADE: An influential Chinese Communist Party journal on Sunday ran a commentary piece saying the United States has underestimated China’s will to fight a trade war and Beijing is prepared for a long economic battle. DEMAND: Recent data from top consumer China shows cooling industrial activity, which is highly correlated with the country’s demand for industrial metals. China accounts for nearly half of global copper demand estimated at about 24 million tonnes this year.
FED: Strong U.S. retail sales data on Friday has led investors to reassess whether the U.S. Federal Reserve will sound as dovish as expected at this week’s monetary policy meeting. This lifted the U.S. currency, which makes dollar-denominated metals more expensive for importers, potentially subduing demand.
TECHNICALS: Support for copper comes in at $5,740 while resistance stands at $5,890, near the 21-day moving average.
CHINA COPPER: Helping to buoy sentiment was China’s refined copper output in May, which fell by 5.2% year on year and 3.9% month on month to 711,000 tonnes. “China may have to import more copper to meet domestic demand,” one copper trader said.
CODELCO: A strike at Codelco’s Chuquicamata mine after labour negotiations failed is also providing some support for copper prices. Codelco is the world’s top producer of the metal.
TIGHT MARKET: Analysts at Morgan Stanley say the copper concentrate market is already tight but hits to supply are overshadowed by macroeconomic risk and trade tensions, which are now visible in slowing copper demand.
“Year to date, not including any loss of supply from Chuquicamata, which Codelco says can continue to operate at 50% capacity during the strike, we estimate that supply losses are running at close to 3% – well ahead of our 5% annual allowance,” the analysts said.
“Weak consumer goods, automotive and electronics end-use sectors are weighing on consumption of refined copper, particularly impacting key exporting nations such as Japan and South Korea.”
PRICES: Aluminium was down 0.5% at $1,756, zinc ceded 0.6% to $2,437, lead gained 0.8% to $1,879, tin lost 1.4% to $18,935 and nickel slipped 0.1% to $11,855.