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Copper Cannot Sustain Momentum, Slumps on Trade Fears

July 10, 2018 at 15:01 by Andrew Moran

Last week, copper prices endured their worst week since 2015, tumbling nine of the last 10 sessions. The industrial metal looked to rebound on Monday, advancing a whopping 1.7% as traders took advantage of lower prices. Copper futures could not sustain that momentum on Tuesday, sliding more than a penny.

September copper futures dipped $0.0155, or 0.54%, to $2.834 per pound at 14:34 GMT on Tuesday on the New York Mercantile Exchange. Copper prices have cratered as much as 15% so far this year, fueled by trade concerns between the world’s two largest economies, the US and China.

In addition to the latest wave of tariffs, President Donald Trump recently noted that the US government may impose tariffs totaling more than $500 billion on Chinese goods. Despite the Beijing leadership denouncing the trade war and protectionist rhetoric, the government has confirmed that it will retaliate with tit-for-tat tariffs, primarily targeting US agriculture.

This is causing anxiety in investors as they fear that the trade spats could affect copper. China is currently the biggest purchaser of copper inventories, but if its economy weakens and trade disputes intensify, then the economic powerhouse may see its demand for the red metal diminish.

The news does not seem to be having an effect on the US dollar as the greenback climbed 0.27% to 94.33. A stronger buck is generally bad for commodities pegged in dollars because it makes it more expensive for foreign investors to acquire. The greenback’s 5% rise over the last three months has coincided with copper’s 10% loss in the same time frame.

Any additional losses may have been capped on reports that month-long negotiations between BHP Billiton Plc and workers at the Escondida copper mine in Chile have hit a road block. With less than three weeks until the negotiation deadline, union officials tell Reuters that they are “far from reaching an agreement.” This could disrupt supplies and create work stoppages.

The bargain buying may have lasted only a single trading session, but the industrial metal’s recovery may not last too long either, considering modest supply and demand balances in the international market.

In other metals markets on Tuesday, August gold futures slipped $5.00, or 0.40%, to $1,254.60 per ounce. September silver futures shed $0.06, or 0.38%, to $16.08 an ounce. September platinum futures dropped $10.60, or 1.24%, to $842.90 an ounce. September palladium futures fell $13.60, or 1.42%, to $941.10 per ounce.

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