LONDON: Industrial metal prices tumbled on Wednesday on concerns about the hit to global growth and demand from trade disputes and political tensions, as well as a stronger dollar.
Benchmark copper on the London Metal Exchange hit a 15-month low of $5,773 a tonne and zinc touched $2,291, a level last seen in October 2016. Lead dropped as low as $1,919.50, the worst since September 2016 and the biggest daily loss in nearly seven years.
“Emerging markets is where most of the demand growth for metals was coming from, there is now a question mark over that,” Commerzbank analyst Eugen Weinberg said.
“China growth has been slowing down for a while and we haven’t seen the whole impact of US tariffs on Chinese imports. Prices may look attractive at these levels, but you can’t exclude more losses.” TRADE: US President Donald Trump has rattled the world trade order by seeking to renegotiate the terms of some of the United States’ trading relationships to combat what he calls unfair trade practices by China, Europe and other countries.
The moves have sparked a bitter tit-for-tat trade dispute with several countries.
TURKEY: The Turkish lira’s plunge to record lows over the past week sent tremors through global markets.
While the currency has recovered a little since Tuesday, investors are fretting about contagion via stress on foreign banks and fire sales of emerging market assets.
CHINA: Fixed-asset investment expanded by a below consensus 5.5 per cent in January-July, a result of Beijing’s crackdown on lavish local government borrowing for projects to boost growth.
Industrial output, which has a strong correlation with industrial metals demand growth, rising 6pc year-on-year in July was also below forecast.
CHINA TRADE: Official trade data for January to July showed limited impact on Chinese imports, but analysts expect the numbers for future months to show deterioration.
DOLLAR: A rising US currency makes dollar-denominated commodities more expensive for non-US firms, which potentially would subdue demand.
ESCONDIDA: Copper prices also came under pressure after the union representing workers at Chile’s Escondida, the world’s largest copper mine, said it would avert its planned strike to consult members about a renewed proposal for a new labour contract from operator BHP.
“The market was largely anticipating some strike action to take place but news yesterday afternoon suggested progress was being made,” analysts at ING said in a note.
PRICES: Copper closed down 4pc at $5,801 and tin finished down 3.2pc at $18,405.
Aluminium ended down 2.2pc to $2,025, zinc slid 6.3pc to $2,300, lead lost 7.1pc to $1,927 and nickel shed 4.3pc to close at a six-month low of $12,850 a tonne.
Published in Dawn, August 16th, 2018