A worker inspects a newly-cast copper anode sheet as it cools in its mold at the MMC Norilsk Nickel PJSC copper refinery in Norilsk, Russia (Photographer: Andrey Rudakov/Bloomberg)  

Base Metals Drop as Trade War Angst Spurs Concern About Demand

(Bloomberg) -- Industrial metals fell for a second day on concern that the escalating U.S.-China trade war will hurt prospects for demand in the biggest users.

The Bloomberg Industrial Metals Subindex, which tracks aluminum, copper, nickel and zinc, slipped 0.8 percent as the market braced for a new round of U.S. tariffs on about $200 billion more in Chinese products that’s seen spurring retaliation from Beijing. Aluminum’s losses also came as the U.S. Treasury softened the impact of sanctions on Russian supplier United Co. Rusal.

Metals have been under pressure for months as the U.S.-led trade war fans concern that the showdown will derail otherwise-strong economic growth in the world’s two largest economies. The dollar has rallied this year, putting additional pressure on buyers in China by making it more expensive to import industrial commodities.

Base Metals Drop as Trade War Angst Spurs Concern About Demand

“We can see no winners in this conflict, and believe that global trade and the global economy will suffer mainly as a result,” Commerzbank AG analysts including Daniel Briesemann said in a note, referring to the new round of U.S. tariffs on Chinese imports. “Base metals are very dependent on economic cycles and therefore react sensitively to them.”

Nickel led the retreat, skidding 3.3 percent to settle at $12,240 a metric ton at 5:50 p.m. on the London Metal Exchange, wiping out all of last week’s gain. Zinc dropped 0.6 percent to $2,320 a ton. Mining shares including Antofagasta Plc and Glencore Plc declined.

“As we have been noting all year, the best of the growth in the industrial cycle is now behind us,” Colin Hamilton, managing director for commodities research at BMO Capital Markets, said in an emailed note. “Trade frictions, emerging-market concerns and cost inflation have all become increasing headwinds, and naturally purchasing managers are less confident.”

On the Comex in New York, copper futures for December delivery gained 0.2 percent to $2.651 a pound ($5,844.4 a ton).

Trade Spat

The U.S. public comment period for the tariffs on $200 billion in Chinese goods has closed, and any new round would be in addition to levies on $50 billion in goods already in place. Trump’s move may prompt Beijing to decline the offer of negotiations, the Wall Street Journal said. Goldman Sachs Group Inc. said last week there’s scope for further losses in metals, despite prices appearing oversold.

Aluminum lost 0.5 percent on the LME. The U.S. Treasury late Friday suggested that customers could sign some new contracts with Rusal -- as long as they were consistent with their dealings with the company before sanctions were imposed in April. That’s important because many aluminum consumers have quarterly or annual contracts with Rusal that are expiring.

Read more: Rusal rallies as U.S. softens curbs without lifting sanctions

In other metals news:

  • What to Watch in Commodities: OPEC, Iron Ore, Gas, Trade, Storms
  • Funds Cut Bullish Copper Bets in Longest Slump Since 2012: Chart
  • China Hongqiao Repurchased HK$115.3M Shares as Stock Sank Friday
  • As Trump Touts Steel Revival, Investors Still Await Payoff

To contact Bloomberg News staff for this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net;Mark Burton in London at mburton51@bloomberg.net

©2018 Bloomberg L.P.

With assistance from Editorial Board