Copper fell to three-month lows on Thursday as escalating concern about US plans to levy duties on Chinese imports and the possibility they could trigger a trade war hit sentiment. Benchmark copper on the London Metal Exchange ended down 1.4 percent at $6,695 a tonne. Prices of the metal used widely in power and construction earlier hit $6,674, the lowest since Dec. 13 last year.
"This whole thing with tariffs is going to drag on and create uncertainty," INTL FCStone analyst Edward Meir said. "If it escalates in terms of retaliation, we're quickly going to move into a slow growth, high inflation and high interest rate environment". Selling of industrial metals was reinforced by a firmer US currency, which when it rises makes dollar-denominated commodities more expensive for holders of other currencies, potentially weighing on demand.
President Donald Trump will sign a memorandum on Thursday to potentially slap tariffs on Chinese imports over forced transfer of intellectual property. The directive will open a consultation period by the US Trade Representative's office to look at a list of Chinese products that could be targeted. China is preparing a response to Trump's planned taxes and will stand up to protectionism, but it hopes for dialogue, China's ambassador to the WTO said.
Upside resistance for copper comes in at $6,935 near the 21-day moving average, followed by $6,960 near the 100-day moving average. Support stands at the 200-day moving average, currently around $6,673. China's refined copper imports will fall for the third straight year in 2018 as domestic production picks up and consumption slows, Antaike, an influential research house said.
Market watching to see which other countries apart from Canada and Mexico might be exempted from a 10 percent tariff on aluminium planned by Trump. Premiums for aluminium in the United States climbed above 19 US cents a lb earlier this month, the highest levels since March 2015, on worries about shortages of the metal used in transport and packaging.
News of exemptions, particularly for Canada the biggest supplier to the US, has seen the premium slide back below 19 cents a lb. The premiums traded on the CME are used to hedge aluminium exposure on the physical market. LME aluminium fell 0.3 percent to $2,075 a tonne, zinc slipped 1.5 percent to $3,201, lead was down 1.3 percent to $2,368, tin slipped 0.7 percent to $20,850 and nickel shed two percent to $13,190. The threat of a trade war and the potential damage to global growth also dragged down benchmark equity indexes in the US and Europe.
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