Demand angst fuels copper’s descent to five-month low
June 04, 2019 By News Team By News Team
Copper prices touched five-month lows on Monday, pressured by the escalating trade dispute between the United States and China and concerns over the damage to manufacturing activity and demand for industrial metals. Benchmark copper on the London Metal Exchange (LME) ended up 0.2% at $5,842 a tonne as funds took profits on short positions – bets on lower prices. Earlier prices hit $5,801, the lowest since Jan. 4. “Pessimism has taken hold. A recovery will need an end, or at least conciliatory moves, between the two sides,” a fund manager trading metals said in reference to the U.S.-China trade dispute. “Manufacturing PMIs show the decline in activity, the outlook for industrial metals doesn’t look good.” Copper prices on the Shanghai Futures Exchange fell to a two-year low at 46,050 yuan.
HIT LIST: China on Friday threatened to unveil an unprecedented hit list of “unreliable” foreign businesses, groups and individuals that harm the interests of Chinese companies. On Saturday it imposed additional levies on the majority of U.S. imports on a $60 billion target list. “These actions could be viewed as putting China back on to a level playing field,” ING analysts said in a note. “The U.S. should now know that suppressing China will result in bounce-back retaliation from China. Whether this will encourage the U.S. to go back to the negotiation table is hard to gauge.”
CHINA: Factory activity in China expanded at a modest pace in May, a private survey showed, but analysts say that front-loading of exports to the United States in an effort to avoid higher tariffs masked underlying weakness in the economy.
EURO ZONE: Manufacturing activity in the euro zone contracted for a fourth month in May and at a faster pace, a survey showed. ISM: The Institute for Supply Management’s U.S. Manufacturing Purchasing Managers Index slipped to 52.1 from 52.8 in April, marking the lowest level since October 2016. Expectations had been for a number at 53.
DOLLAR: A weaker U.S. currency makes dollar-denominated metals cheaper for holders of other currencies. This is a relationship used by funds to generate buy and sell signals.
POSITIONS: “The copper net speculative short position has inched up to 7.4% of open interest, or 13,000 lots, largely back to levels not seen since October,” Marex Spectron analysts said in a note. One lot is 25 tonnes. “Last year the short in copper peaked at 30% of open interest on July 19.”
PRICES: Aluminium ended down 1% at $1,777 a tonne, zinc lost 2.2% to $2,468, lead rose 0.3% to $1,810 and tin gained 2.3% to $19,150. Nickel was untraded at the close, but was down 1.2% at $11,880 in electronic trade.
