LONDON: Copper traded on the US Comex exchange increased its premium against its London counterpart on Tuesday after US President Donald Trump threatened to impose tariffs on copper imports.
Benchmark copper on the London Metal Exchange (LME) slipped 0.6% to $9,042 a metric ton by 1515 GMT, having touched its lowest in nearly three weeks. Most active US Comex copper futures, however, gained 0.7% to $4.263 a lb.
In a speech on Monday, Trump said he would impose the tariffs on aluminium and copper - metals needed to produce US military hardware - as well as steel, to boost domestic output.
“The market is taking that threat of tariffs on copper imports into the New York Comex exchange seriously,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen. Since Trump was elected, Comex copper has traded at a premium to LME as investors sought to price in the impact of potential tariffs.
Last week the premium slipped to around $250 a ton, but climbed to $356 on Tuesday.
“So, the premium is moving out once again and this reflects people’s worries and basically dissuading any short sellers in the New York market,” Hansen added. The weak prices on the LME partly reflect concern about a sluggish economy in top metals consumer China. “Economic fundamentals point to a weaker copper price as Chinese growth still appears underwhelming and the risk of global trade wars is rising,” said Kyle Rodda, senior financial markets analyst at Capital.com.
Data on Monday showed that China’s manufacturing activity unexpectedly contracted in January, keeping alive calls for stimulus measures. Also weighing on the LME market was a firmer dollar index , making commodities priced in the US currency more expensive for buyers using other currencies.
The Shanghai Futures Exchange will be closed from Jan. 28 until Feb. 4 due to the Lunar New Year holiday. Among other metals, LME aluminium fell 0.6% to $2,587 a ton and zinc dropped 1.7% to a 3-1/2-month low of $2,791.50. Lead eased 0.7% to $1,934.50, nickel lost 0.5% to $15,480 while tin rose 0.5% to $29,800.
Comments