Copper prices fell to their lowest level in nearly five months on Thursday after a Chinese diplomat ramped up rhetoric that could stoke the trade conflict between the United States and China and possibly erode metals demand. Provoking trade disputes is "naked economic terrorism", Chinese Vice Foreign Minister Zhang Hanhui said on Thursday, amid a lengthening trade row between the world's top two economies.
Tit-for-tat tariffs between the two countries resumed earlier this month, the United States blacklisted China's Huawei Technologies and China hinted it may use its dominant position as an exporter of rare earths as leverage. "Negotiations appear to have halted and although there has been nothing specific to suggest that there won't be further discussions, the recent actions from the Chinese indicate everything is moving in the wrong direction in terms of getting a deal," said Capital Economics analyst Ross Strachan.
The conflict has the potential to sap demand for copper from China, which accounts for nearly half of global consumption estimated at around 24 million tonnes this year. Three-month copper on the London Metal Exchange ended 0.5% lower at $5,852 a tonne, its lowest since January 4. Headline stocks of copper in LME-approved warehouses surged 27,450 tonnes or 15% to 212,450 tonnes, having jumped about 60% so far this year.
In China, stocks of copper fell 8.4% to 172,266 tonnes, according to latest available weekly data from the exchange on Friday. Prices for LME tin touched the lowest since November at $18,630 per tonne, but closed 0.3% higher at $18,775 per tonne. Stocks of tin have shot up 60% so far this week to 2,650 tonnes.
In a fight against US sanctions that threaten to push it out of global markets, Huawei Technologies filed a legal motion seeking to declare a US defence law unconstitutional. Disruptions in top copper producer Chile, political and power problems in Zambia and restrictions on scrap imports into China are expected to weigh on copper supplies in the second half of 2019.
The premium of LME cash zinc over the three-month contract eased to $144 a tonne on Thursday after touching a 22-year high of $161 the day before, indicating near-term shortages in the LME system.
The London zinc market is in the grip of the most protracted and acute squeeze in 30 years. Aluminium fell to its lowest in a week, down 0.7% at $1,782 per tonne, zinc rose 0.7% to $2,561, lead slipped 1.6% to trade at $1,803, and nickel rose 0.9% by 1636 GMT in electronic trading to $12,155.