Copper and zinc slid to fresh lows on Wednesday as speculators stepped up selling ahead of new trade tariffs on goods from China and the United States which could dampen demand for industrial metals. Benchmark copper on the London Metal Exchange slumped to a low of $6,344 a tonne, its weakest since August 2017, before paring losses and closing at $6,386, a drop of 1.6 percent.
LME zinc tumbled 3.2 percent to finish at $2,700 a tonne, the lowest since June Last year. "(US President Donald) Trump is not fostering global trade," said Julius Baer analyst Carsten Menke. "There is scrutiny about the export side of the market in terms of copper-containing household goods or electronics being shipped out of China and we believe that will stay with us at least until US mid-term elections in November."
Washington has said it would implement tariffs on $34 billion of Chinese imports on July 6, and Beijing has vowed to retaliate in kind on the same day. China was ready to act, but would not fire the first shot in a trade war with the United States, its finance ministry said.
Adding to pressure on copper by highlighting healthy supplies, Indonesia has extended a temporary operating permit for Freeport McMoRan Inc's Grasberg project, the world's second-biggest copper mine, until the end of the month.
Growth in China's services sector accelerated in June to a four-month high, buoyed by a pickup in new businesses and a sustained increase in employment, a private survey showed. Traders are watching a large holding, between 40 and 50 percent of total zinc inventories on the LME. It has fuelled worries about a short-term shortage on the LME market and led to a premium for the cash contract over the three-month, which was at $51 on Wednesday.
Aluminium, was the only LME metal to end in the black, rising 0.4 percent to end at $2,089 a tonne. It got a boost when China's top steelmaking city Tangshan ordered companies in the steel, coke and coal-fired power sectors to meet ultra-low emissions targets, the latest effort to curb air pollution.
"Even though this drive's effect on the aluminium industry remains unclear, some will see it as a positive," Alastair Munro at broker Marex Spectron said in a note. Nickel and lead both hit the lowest levels since May. Nickel shed 1.9 percent to close at $14,145 a tonne while lead dropped 2.9 percent to $2,322. Tin ended 0.3 percent weaker at $19,600 after falling to $19,500, the lowest since Dec. 27 last year.
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