Copper slipped on Thursday after China said it would hit back against additional US tariffs, fuelling fears over global growth and metals demand. Some other industrial metals, however, clawed higher in thin volumes as investors closed out bearish positions.
China has to take necessary counter-measures to the latest US tariffs on $300 billion of Chinese goods, the finance ministry said on Thursday, while US President Donald Trump said any trade deal with China must be on US terms.
The macroeconomic situation remains bad despite hopes in some quarters for more stimulus to stabilise China's economy further, said Gianclaudio Torlizzi, partner at the T-Commodity consultancy in Milan. "In the very short term we could see some more downside as long as the macro doesn't improve," he said. "But if you have a longer-term view, we are approaching nice buying areas for the big metals. It's a nice opportunity to get some exposure."
Metals fell on Wednesday after an inversion of US government bond yields on Wednesday sparked fears that the world's biggest economy would sink into recession, dragging the rest of the globe with it. Benchmark copper on the London Metal Exchange shed 0.2% to $5,751 a tonne in final open-outcry trading, after dropping as far as $5,640 this month, setting a two-year low.
Prices of new homes in China rose in July but the year-on-year growth of 9.7% was the weakest so far this year. The construction industry is one of the biggest consumers of industrial metals. Copper inventories in LME-registered warehouses jumped 11%, or 29,950 tonnes, to 301,750 tonnes, indicating healthier short-term supplies.
Shanghai copper premiums have risen 12% over the past two weeks to $68 a tonne. "A combination of low stockpiles in China and an open arb window earlier this month prompted increased buying appetite from traders, particularly for nearby cargoes," BMO Capital analyst Colin Hamilton said in a note. LME cash nickel flipped to a premium of $13 a tonne over the three-month contract by Wednesday's close. That was the strongest premium since mid-May and up from a discount of $11 a day earlier.
This indicates near-term shortages of metal in LME warehouses, which could be exacerbated by one party holding 50%-80% of available nickel LME inventories, LME data showed. LME three-month nickel climbed 1.9% to finish at $16,250 a tonne after hitting a 16-month high last week on concerns over supply disruption in Indonesia.
LME aluminium ticked 0.4% higher to end at $1,782 a tonne amid ongoing concerns about disruptions after floods in the smelting heartland of China's eastern province of Shandong. LME zinc gained 0.4% to close at $2,264 a tonne, lead rose 1.1% to $2,064 and tin added 0.1% to $17,145.
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