LONDON: Copper prices fell to their lowest in more than two years on Monday due to the escalating trade dispute between the United States and China, while nickel prices climbed on concern about supplies from Indonesia.
Benchmark copper on the London Metal Exchange was untraded in official rings, but bid 0.9pc lower at $5,677 a tonne. Prices of the metal used widely as a gauge of economic health earlier hit $5,640 a tonne, the lowest since June 2017.
"Commodities and producers are being used as proxies for macro economic sentiment. Prices do not reflect fundamentals or fair value," said Bernstein analyst Paul Gait.
"There are question marks over Indonesian (nickel) supplies, it looks like the grace period on the ore ban is coming to an end."
TRADE: US President Donald Trump last week said the United States would impose more tariffs on Chinese imports, while China vowed to fight back, ending a month-long trade truce between the world's two biggest economies.
"The 10pc tariff on the $300 billion worth of goods, if imposed, could further reduce China's exports by 2.7pc and drag down China's GDP growth by 50 basis points," Citi analysts said in a note.
"China's mid-year politburo meeting emphasised stability and modest stimulus in preparation for a prolonged trade war. But downside risks loom large if said countermeasures are further disruptive, likely leading most commodity prices to our bear case scenario."
China consumes around half of the world's supply of industrial metals.
YUAN: China has also allowed the yuan to breach the key 7 per dollar level for the first time in more than a decade, in a sign Beijing might be willing to tolerate more currency weakness that could further inflame the trade conflict.
NICKEL: Prices of the stainless steel ingredient hit a two-week high at $14,930 a tonne on the LME, while on the Shanghai Futures Exchange they touched a four-year high.
The latest trigger is a supply risk from Indonesia.
Three-month nickel was bid up 2.9pc at $14,895 a tonne.
INDONESIA: Throughout 2017, Indonesia issued permits to export more than 22 million tonnes of nickel ore.
Permits typically stand for one year and companies are allowed to renew them. Under current rules, no unprocessed ore exports will be allowed after January 2022.
"Some people say Indonesian may advance the ore ban from 2022 to this year. I'm not sure how true it is, but some investors will gamble on this to buy nickel," said a nickel analyst.
PRICES: Aluminium was unchanged at $1,770 a tonne, zinc slipped 1.1pc to $2,324, lead fell 0.6pc to $1,941 and tin dropped 1pc to $16,800.
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