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Copper Gains on Weaker Dollar, Zambia’s 11% Drop in Output

May 24, 2019 at 13:40 by Andrew Moran

Copper futures are mustering up gains on Friday, but they are still poised to record a weekly loss as the industrial metal approaches correction territory. With copper eliminating nearly all of its gains for the year, the trend is sending a signal that traders are betting on a prolonged slowdown in the global economy.

July copper futures rose $0.01, or 0.4%, to $2.69 per pound at 12:32 GMT on Friday on the Comex division of the New York Mercantile Exchange. Copper prices are on track for a weekly drop of 2.1%, the sixth consecutive week of losses. While the red metal is up close to 2% year-to-date, copper has erased nearly all of its gains, sending it into correction territory.

Since copper is mainly utilized in construction and manufacturing, a slumping global economy would weigh on prices. A plethora of recent data suggests that construction and manufacturing activity has cooled down in recent months, leading to a paucity of demand for copper. With the US-China trade war entering a new phase that could see the spat linger into the summer and even towards the end of the year, the rest of the economy could suffer.

It is unclear to the state of US-China trade negotiations. The latest reports show that Beijing is encouraging Washington to correct its “wrong actions,” and President Donald Trump has noted that Huawei could be included in the trade agreement, which would be a huge development after banning US companies to work with the Chinese telecommunications juggernaut.

For now, Beijing contends that the trade environment has become more uncertain and challenging.

In industry news, Zambia, one of the world’s largest copper producers, confirmed that the nation’s output could be as much as 100,000 tonnes lower than last year. Citing mining taxes and cuts in production, the government said that Zambia’s output in the first quarter of 2019 tumbled 11.3% to 195,244 tonnes, compared to the same time a year ago.

As a comparison, Africa’s second-largest copper producer churned out more than 860,000 tonnes in 2018.

Zambia’s Chamber of Mines said in a statement:

The new tax regime forced miners to do the unthinkable – cut production – because many cannot afford to continue producing as before.

Copper was also lifted by a weaker US dollar as the greenback fell 0.09% to 97.77. A lower buck is good for commodities priced in dollars because it makes it cheaper for foreign investors to purchase.

In other metal markets, August gold futures shed $2.00, or 0.16%, to $1,283.40 per ounce. July silver futures dipped $0.05, or 0.35%, to $14.56 an ounce. July platinum futures added $4.30, or 0.54%, to $803.80 per ounce. July palladium futures tacked on $21.40, or 1.64%, to $1,329.20 an ounce.

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