Rising inventories, trade war fears weigh on copper

LONDON — Copper slumped to its lowest level in more than three months on Tuesday as rising inventories highlighted healthy supplies.

Concern about trade wars, higher US interest rates and a stronger dollar also weighed on industrial metals markets.

London Metal Exchange (LME) prices extended losses in the European afternoon as US computer-driven funds stepped up selling.

“The US has opened up and they’re carrying on the negative sentiment,” said Geordie Wilkes, head of research at Sucden Financial.

In the morning, copper was hit by data showing LME copper stocks grew by a further 3,200 tons on Tuesday to 322,475 tons, bringing this month’s rise to 61%.

While some investors have been worried that potential strikes at copper mines could create shortages, this was not a major threat given robust supplies, said Caroline Bain, chief commodities economist at Capital Economics.

Some labour deals have already been sealed while progress was announced on Tuesday in wage talks at Antofagasta’s Los Pelambres copper mine in Chile.

“We’ve been forecasting from the beginning that copper prices would fall this year because we just didn’t think the market was that tight,” Mr. Bain said, adding that her year-end target was $6,500.

Three- month LME copper closed 1.4% down at $6,755 a ton, marking a fourth session of losses. It had dipped as low as $6,730, its weakest level since Dec. 14.

Further highlighting growing copper supplies, Zambia said it expects to produce more than a million tons this year after revising its 2017 copper production upwards on the back of stable power supply.

Also weighing on markets were fears of a global trade war after US President Donald Trump imposed hefty import tariffs on steel and aluminium. Sources in Washington said he was also poised to unveil new tariffs targeting China by the end of this week.

LME benchmark zinc fell 1.8% to finish at $3,203 a ton.

LME zinc stocks have shot up by 60% this month, climbing by another 5,350 tons on Tuesday to 211,400 tons.

LME aluminium fell by 0.6% to close at $2,076 a ton, with losses moderating after Japanese buyers agreed to pay producers premiums during the second quarter that are 25% higher than the previous quarter, reflecting rising spot premiums in the United States.

Lead dropped 0.7% to close at $2,351 a ton, nickel lost 0.2% to $13,450 and tin was down 0.5% at $20,675. —