Escalating US-China trade dispute hits copper

LONDON — Copper prices fell on Monday after US President Donald Trump threatened to impose tariffs on virtually all Chinese imports into the United States, escalating the trade dispute and stoking fears of weaker demand for industrial metals.

Benchmark copper on the London Metal Exchange (LME) closed 0.4% down at $5,910 a ton, a loss of about 20% since hitting a 4-1/2-year high of $7,348 in June. It crashed to a 14-month low of $5,773 on Aug. 15.

“The trade dispute is not going to disappear. The market still does not fully understand this and has not completely priced this in,” said Commerzbank analyst Eugen Weinberg, adding that he expects to see larger losses.

“If a large proportion of Chinese exports to the US are subject to penalties, there will be a massive impact on trade flows and it will probably change companies’ investment plans.”

Mr. Trump on Friday threatened duties on another $267 billion of Chinese goods on top of $200 billion in imports primed for levies in coming days and Beijing said it would respond.

Wood Mackenzie estimates the expansion of the tariff list could raise the impact to around one percent of total Chinese copper demand, as many copper intensive goods are included in the extended list.

China’s trade surplus with the US widened to a record in August even as its export growth slowed slightly, an outcome that could push Mr. Trump to turn up the heat on Beijing. China is the world’s largest consumer of copper, accounting for nearly half of global demand estimated at around 24 million tons this year. China’s imports of copper fell 6.7% from a month ago to 420,000 tons in August, data showed.

A report that Russian aluminum producer Rusal may start output cuts this month helped aluminum to rebound, ending the day 1.3% higher at $2,095 a ton.

The discount of the LME aluminum cash contract to the three-month contract increased to $39 a ton, the highest since July 2015.

Usually that move in the benchmark spread would indicate increased supply of the metal, but traders said it was mostly driven by technical issues.

A large holding — between 50% and 79% —of cash contracts and warrants is creating some nervousness about shortages on the LME market ahead of seasonally strong demand from battery makers.

Among other industrial metals, zinc fell 1.6% to close at $2,381; lead slid 2.4% to $2,028; tin ceded 0.3% to $19,005; and nickel added 0.5% to $12,410. —