Prices of most Shanghai base metals fell on Wednesday as market participants remained edgy ahead of crucial U.S.-China trade talks in Washington this week, but London copper pulled away from lows in the previous session.
The long-standing trade conflict between Washington and Beijing could further slow the global economy while clouding the outlook for demand from top metals consumer China.
Market participants are braced for stormy conditions to persist, said industry sources attending LME Asia Week events in Hong Kong this week.
Chinese Vice Premier Liu He will travel to Washington for talks on Thursday and Friday, setting up a last-ditch bid for a deal that would avoid a sharp increase in tariffs on Chinese goods ordered by U.S. President Donald Trump.
Trump tweeted on Sunday he would raise tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent by Friday, and target a further $325 billion of Chinese goods with 25 percent tariffs “soon”.
The market volatility shows how “confused” participants are as trade tensions intensify even as negotiations continue, said Jackie Wang, an analyst at commodities consultancy CRU in Beijing. “We don’t know what will happen until Friday.”
“It seems unlikely the two sides are ready to reach an agreement, with Trump’s threat to increase U.S. tariffs on Chinese goods not helping the negotiation process,” ANZ Research said in a note.
Amid what some analysts describe as a challenging outlook for Chinese exports, the latest trade data gave a mixed picture of the world’s second-biggest economy. China’s April exports shrank unexpectedly while imports surprised with their first increase in five months.
- The most-traded copper contract on the Shanghai Futures Exchange fell as much as 1.1 percent to 47,760 yuan ($7,053.61) a tonne, before closing 0.9 percent lower at 47,840 yuan.
- China’s unwrought copper imports rose 3.6 percent in April from the previous month, according to data released by the General Administration of Customs on Wednesday, as demand gathered momentum at the start of the peak-consumption second quarter.
- Benchmark copper on the London Metal Exchange was up 0.3 percent at $6,198 a tonne as of 0721 GMT, after trading near 2-1/2 month lows on Tuesday.
- CHILE: Copper production at Chile’s top mines dropped sharply in the first quarter of 2019, Chilean copper commission Cochilco said on Tuesday, amid a perfect storm of operational issues, heavy rains and falling ore grades at the largest deposits.
- TRADE: Washington has accused Beijing of reneging on substantial commitments made during months of negotiations aimed at ending their trade war, prompting Trump to issue a Friday deadline to raise tariffs on Chinese goods.
- PRICES: ShFE aluminium rose 0.4 percent to 14,045 yuan a tonne, while LME aluminium was up 0.4 percent at $1,823. ShFE zinc lost 1.7 percent to 21,210 yuan and LME zinc eased 0.1 percent to $2,690.50, after falling to $2,673.50 earlier in the day, the lowest since Feb. 22.