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Copper Surges on Renewed US-China Trade Talks, Capped by Weak Manufacturing

July 10, 2019 at 13:58 by Andrew Moran

Copper futures are rallying midweek as the world’s two largest economies have restarted important trade negotiations. After two months of sitting on the sidelines, both sides have returned to the table to iron out a trade agreement that could finally end the dispute and create some certainty in the global economy. But the industrial metal’s ascent was capped on concerns over weak manufacturing trends in China.

September copper futures rose $0.05, or 1.93%, to $2.675 per pound at 13:34 GMT on Wednesday on the Comex division of the New York Mercantile Exchange. Copper prices have had an interesting year so far. The red metal is up just 1% after it pared most of its gains in the last three months by tumbling 8%.

This week, US and China trade representatives spoke over the telephone as they announced that will they will soon meet face to face to “resolve the outstanding trade disputes.” US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke to Chinese Vice Premier Liu He and Commerce Minister Zhong Shan, discussing that “both sides will continue these talks as appropriate.”

At the recent G20 summit, President Donald Trump and President Xi Jinping agreed to a trade truce and will not impose new tariffs. The White House is pushing China to import more American goods and rein in intellectual property theft, which Beijing has been doing. China, on the other hand, wants Washington to lower tariffs and scrap the 25% levies on billions of Chinese goods. Trump has said that he is likely to leave the duties in place until a trade deal has been installed.

If a new trade agreement is implemented and global commerce returns to normal, then this might spur economic growth and renew demand for copper.

However, due to the trade war, Chinese manufacturing has slowed down. All the recent data suggest that Beijing’s manufacturing activity has subsided in the last year, particularly as more companies shift their operations out of China and into neighboring countries with little to no tariffs.

Meanwhile, copper output in the Democratic Republic of Congo soared by 11.2% year-on-year in the January-to-May period. The continent’s top producer reported that production totaled 552,044 tonnes in the first five months of 2019, compared to 496,468 tonnes during the same time a year ago.

This comes as Zambia has said that it expects lower output levels by as much as 11% in 2019, primarily because of a mining tax imposed by the government earlier this year.

In other metal markets, August gold futures climbed $11.00, or 0.8%, to $1,411.50 per ounce. September silver futures tacked on $0.13, or 0.87%, to $15.28 an ounce. September platinum futures soared $12.70, or 1.56%, to $827.80 per ounce. September palladium futures skyrocketed $44.70, or 2.9%, to $1,584.60 per ounce.

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