Copper slides as spotlight falls on sagging China demand

LONDON: Copper prices fell on Tuesday as the market focused on prospects for weaker demand in top consumer China, where activity in the manufacturing sector has deteriorated due to the prolonged US-China trade dispute.

Benchmark copper on the London Metal Exchange was untraded in official rings, but bid down 0.8% at $5,736 a tonne. Prices of the metal used widely in the power and construction industries have fallen 13% since the middle of April.

"The trade war is being reflected in the hard data, not just sentiment. Copper demand has taken a hit," said Citi analyst Oliver Nugent. "The copper market will be balanced this year, so the macro (economic) picture will be the swing factor."

Citi's China copper end-user tracker, down 0.8% year-on-year in July, was the third consecutive negative reading, Nugent said. China accounts for around half of global copper demand estimated at around 24 million tonnes this year.

TRADE: The US appeared to have softened its stance on China's Huawei buying components from US companies.

But the 90-day extension "is intended to afford consumers across America the necessary time to transition away from Huawei equipment, given the persistent national security and foreign policy threat," the Commerce Department said.

G7 SUMMIT: The meeting to be held this weekend in France will likely end without a joint communique due to rifts between member nations on trade.

TECHNICALS: Strong support for copper prices comes in at the 2019 low of $5,640 a tonne and resistance is around $5,830, near the 21-day moving average.

SPREADS: The higher discount of $28 a tonne for the cash against the three-month <CMCU0-3> contract also suggest ample availability of copper on the LME market. The discount on July 17 was $7 a tonne.

STOCKS: Copper inventories in warehouses registered with the LME at 329,600 tonnes <MCUSTX-TOTAL> are nearly double the levels at the end of May.

ALUMINIUM: Aluminium prices on the Shanghai Futures Exchange rose to their highest since last October due to concern about output disruptions in China.

Xinfa Group, one of China's top aluminium producers, has shut down an aluminium production line after an explosion at a plant in the northwestern Chinese region of Xinjiang, according to a company source.

"A power disruption at a northwest China aluminium smelter caused 500,000 tonne per year of production to be completely halted," metals consultants CRU said in a note to clients.

CHINA: China produced 35.8 million tonnes of aluminium last year, while output was 20.49 million tonnes in the first seven months of 2019, up 1.6% from the same period a year earlier, official data showed.

PRICES: LME aluminium lost 0.5% to $1,785 a tonne, zinc fell 1% to $2,239, lead was down 0.3% at $2,047, tin slipped 0.5% to $16,400 and nickel ceded 0.6% to $15,820.