Copper rallies; focus on US-China trade spat

LONDON — Copper rallied on Monday alongside equities as worries about economic growth receded, but an escalating trade dispute between the United States and China is expected to cap prices.

Benchmark copper on the London Metal Exchange (LME) ended up 1.7% at $ 6,390 a ton. Prices of the metal used widely in power and construction last week touched $ 6,221.50, the lowest since July 2017.

“Trade rhetoric from the US administration continues to upset risk sentiment and this has been reflected in the downward trend in copper prices in June and early July,” analysts at Wood Mackenzie said.

Positive job data in the US last Friday reassured investors who have yet to witness an actual slowdown due to the implementation of higher trade barriers.

The US and China exchanged the first salvos in what could become a protracted trade war on Friday, imposing tariffs on $ 34 billion worth of each others’ goods and giving no sign of willingness to start talks aimed at a reaching a truce.

Recent data from China show growth may be slowing due to tighter credit conditions and softer domestic demand ranging from government- funded infrastructure investment to consumer spending.

Global copper consumption is estimated at around 24 million tons this year, with China accounting for about half of that amount.

A lower US currency helped to support industrial metals as this makes dollar-denominated commodities cheaper for holders of other currencies. This relationship is used by funds to generate buy and sell signals from numerical models.

Large holdings of LME copper warrants and cash contracts have fuelled concern about nearby supplies.

This has seen the discount for the cash over the three- month contract narrow to around $3 a ton from near $ 50 a ton in the middle of April.

The copper market is watching labor negotiations at BHP Billiton’s, Escondida copper mine in Chile, the world’s largest, before a 30-month contract expires at the end of July.

China’s three-year action plan to curb air pollution by 2020 has extended its reach into cities where the problem is worsening.

Among other industrial metals, aluminium rose 2% to $2,121 a ton, zinc slipped 1.1% to $2,705, lead gained 0.30% to $2,339, tin was up 1.7% at $19,645 and nickel added 1.9% to $14,215. —