Copper Slides as Spotlight Falls on Sagging China Demand

Copper prices fell on Tuesday as the market focused on prospects for weaker demand in top consumer China, where activity in the manufacturing sector has deteriorated due to the prolonged U.S.-China trade dispute.

Benchmark copper on the London Metal Exchange traded down 1.1% at $5,711 a tonne. Prices of the metal used widely in the power and construction industries have fallen 13% since the middle of April.

“The trade war is being reflected in the hard data, not just sentiment. Copper demand has taken a hit,” said Citi analyst Oliver Nugent. “The copper market will be balanced this year, so the macro (economic) picture will be the swing factor.”

Citi’s China copper end-user tracker, down 0.8% year-on-year in July, was the third consecutive negative reading, Nugent said. China accounts for around half of global copper demand estimated at around 24 million tonnes this year.

TRADE: The U.S. appeared to have softened its stance on China’s Huawei buying components from U.S. companies. But the 90-day extension “is intended to afford consumers across America the necessary time to transition away from Huawei equipment, given the persistent national security and foreign policy threat,” the Commerce Department said.

G7 SUMMIT: The meeting to be held this weekend in France will likely end without a joint communique due to rifts between member nations on trade. SPREADS: The higher discount of $28 a tonne for the cash against the three-month contract also suggest ample availability of copper on the LME market. The discount on July 17 was $7 a tonne.

STOCKS: Copper inventories in warehouses registered with the LME at 329,600 tonnes are nearly double the levels at the end of May.

ALUMINIUM: Aluminium prices on the Shanghai Futures Exchange rose to their highest in more than nine months due to concern about output disruptions in China. Xinfa Group, one of China’s top aluminium producers, has shut down an aluminium production line after an explosion at a plant in the northwestern Chinese region of Xinjiang, according to a company source.

“At the moment, the world excluding China primary aluminium market still remains in deficit,” said ING analyst Wenyu Yao in a note. “If the Chinese market were to switch to a deficit or even balance, the tightness is likely to be felt in the rest of the world through a slowdown in semis exports, which may provide some support to LME prices.”

CHINA: China produced 35.8 million tonnes of aluminium last year, while output was 20.49 million tonnes in the first seven months of 2019, up 1.6% from the same period a year earlier, official data showed. TECHNICALS: Zinc fell to $2,223, its lowest since October 2016, after earlier breaking through the 100-day moving average around $2,300. It ended down 1.6% at $2,226 PRICES: LME aluminium lost 0.7% to $1,782 a tonne, lead gained 0.3% at $2,061, tin was unchanged at $16,475 and nickel ceded 0.4% to $15,860.


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