Copper prices recovered on Monday, boosted by a mine strike and weak Chinese output, but other industrial metals were pressured by nervousness about the damage to growth and demand from the US-China trade dispute. Benchmark copper on the London Metal Exchange (LME) gained 0.5% to $5,848 a tonne in closing open outcry trading after earlier sinking to an intraday low of $5,776.
Prices of the metal used widely in power and construction hit a five-month low of $5,740 a tonne earlier in June. But LME three-month aluminium finished 0.3 percent weaker at $1,758.50 after touching $1,745, the lowest since January 2017. "Fears of decelerating global growth and recession because of the trade war have hit sentiment in the mining sector," said Bernstein analyst Paul Gait. "The risk-off malaise is what we are seeing."
Helping to buoy sentiment for copper was a decline in China's refined copper output in May by 5.2% year on year and 3.9% month on month to 711,000 tonnes. "China may have to import more copper to meet domestic demand," one copper trader said. A strike at Codelco's Chuquicamata mine after labour negotiations failed is also providing support for copper prices. Codelco is the world's top producer of the metal.
Analysts at Morgan Stanley say the copper concentrate market is already tight but hits to supply are overshadowed by macroeconomic risk and trade tensions, which are now visible in slowing copper demand. "Year to date, not including any loss of supply from Chuquicamata, which Codelco says can continue to operate at 50% capacity during the strike, we estimate that supply losses are running at close to 3% - well ahead of our 5% annual allowance," the analysts said.
"Weak consumer goods, automotive and electronics end-use sectors are weighing on consumption of refined copper, particularly impacting key exporting nations such as Japan and South Korea." An influential Chinese Communist Party journal on Sunday ran a commentary piece saying the United States has underestimated China's will to fight a trade war and Beijing is prepared for a long economic battle.
Recent data from top consumer China shows cooling industrial activity, which is highly correlated with the country's demand for industrial metals. China accounts for nearly half of global copper demand estimated at about 24 million tonnes this year. The US dollar was modestly lower on Monday on weak economic data, but remained near a two-week high set earlier in the session. A weaker US currency makes dollar-denominated metals less expensive for importers, potentially supporting demand. Zinc closed 0.7% firmer at $2,470 a tonne, lead gained 1.1% to $1,886, tin lost 1.3% to $18,950 and nickel, untraded in closing rings, was down 0.8% at $11,775 in electronic trading.
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