London copper snaps back from near one-year low

MELBOURNE — London copper rebounded on Monday from a near one-year low hit in the session before, as a weak dollar forced short holders to cover positions amid simmering trade war tension.

“Chinese data has been weak following an extended period of tightening, and the threat of escalating trade wars is not helpful,” said Jefferies in a report.

“Slow global demand growth and increasing supply constraints should lead to tighter markets heading into 2019. Copper continues to be our preferred commodity, especially after the recent weakness.”

FUNDAMENTALS

London Metal Exchange (LME) copper rallied 1.3% to $6,402.50 by 0352 GMT after prices slumped to $6,221.50 a ton on Friday, which was the weakest since late July 2017.

Shanghai Futures Exchange copper also rebounded, rising 1.2% to 49,880 yuan ($ 7,534) a ton.

There is still huge tightness between the July-August copper contract, suggesting shorts may have to deliver into warehouses in the next week if they can. July is trading at an $11 premium against August.

Other LME metals were all around 1-2% higher from Friday.

The US economy created more jobs than expected in June, but steady wage gains pointed to moderate inflation pressures that should keep the Federal Reserve on a path of gradual interest rate increases this year.

The global economy is starting to show signs of strain from the “America First” push of US President Donald Trump who will hear renewed pleas to step back from a broader trade war when he visits Europe in the coming week.

Wall Street has taken the ChinaUS tariffs enacted on Friday in its stride so far, but investors are on alert for a ramp-up in the trade conflict.

Labor negotiations at BHP Billiton Plc. Escondida copper mine in Chile, the world’s largest, are entering into the final three weeks before a 30- month contract expires at the end of July.

Chinese alumina producer Luoyang Heungkong Wanji Aluminium Company Ltd. said on Friday it has cut output of alumina by 680,000 tons on an annual basis, a day after state-run Chalco announced its own alumina cuts citing low prices.

China’s broad economic growth was expected to ease to around 6.6% in the second half of this year, the State Information Center said on Saturday. —