Copper prices fell on Thursday as the trade dispute between the United States and China escalated and the dollar strengthened on expectations of higher U.S. interest rates soon.
Benchmark copper traded down 1.1 percent at $5,940 a tonne in official rings, heading towards the 14-month low of $5,773 a tonne hit last week. Earlier this week it touched a one-week high at $6,076 a tonne.
“The Fed is on course to raise rates further this year and the dollar is up on that and the new tariffs, which will also hurt growth,” said Commerzbank analyst Eugen Weinberg.
“Still the fundamentals are not bad, we expect a small surplus this year and next year there is the likelihood of a deficit. Demand is robust.”
TRADE: The United States and China escalated their acrimonious trade war on Thursday, implementing punitive 25 percent tariffs on $16 billion worth of each other’s goods, even as mid-level officials from both sides resumed talks in Washington.
DOLLAR: A rising U.S. currency makes dollar-denominated commodities more expensive for non-U.S. firms, which could potentially subdue demand.
FED: Federal Reserve officials discussed raising interest rates soon to counter excessive economic strength but also examined how global trade disputes could batter businesses and households, minutes of the U.S. central bank’s last policy meeting showed.
RATES: The U.S. central bank is expected to raise rates twice more this year and twice next year, a Reuters survey showed. The Fed next meets Sept. 25-26.
DEFICIT: The global world refined copper market showed a 31,000-tonne deficit in May, compared with a 105,000-tonne deficit in April, the International Copper Study Group (ICSG) said in its latest monthly bulletin.
SURVEY: A recent Reuters survey showed analysts on average expect a copper market deficit of 129,000 tonnes this year and a shortfall of 151,000 tonnes in 2019.
PHYSICAL: China’s copper producers and traders are riding an unexpected surge of business that has pushed physical prices to their highest in nearly two years as fabricators rush to buy refined metal to avoid import tariffs on scrap that kick in on Thursday.
CHINA: China accounts for nearly half of global copper consumption estimated at 24 million tonnes. The United States accounts for about 8 percent.
STOCKS: Cancelled warrants – material earmarked for delivery – for copper in LME-approved warehouses have risen above 84,000 tonnes, from around 25,000 tonnes last week. The latest number is about 31 percent of LME copper stocks. MCUSTX-TOTAL
PRICES: Aluminium was down 1.1 percent at $2,043, zinc fell 1.4 percent to $2,433, lead rose 0.5 percent to $2,023, tin lost 1.7 percent to $19,040 and nickel ceded 2.2 percent to $13,230.
Source: Reuters (Reporting by Pratima Desai; Editing by Mark Potter and Jan Harvey)