Mubasher: A trade row between the world’s two biggest economies is viewed as the major catalyst for volatile metal prices, while this prompted market players to prepare for unfavourable conditions to remain, Reuters said, citing Hong Kong-based industry sources.
As trade tensions between the US and China re-emerged, trading conditions in metal markets grew tougher, according to Freepoint Commodities strategist David Wilson.
Financial markets received this week a major blow from a surprise deterioration in the trade talks between the US and China, as the prospect of an escalation outran the chances of an end to the 10-month trade war that has roiled markets for a while.
Beijing reportedly backtracked on its commitments made during talks with Washington, prompting President Donald Trump to threaten to raise tariffs on Chinese imports.
“This is very dramatic and obviously we now have this issue of we don’t know what Trump will tweet next and this is making trading metals incredibly difficult,” Wilson was quoted by Reuters.
Last June, during the heat of the trade conflict, copper prices on the London Metal Exchange (LME) slid by 20%, retreating from a peak of $7.350 per tonne reached during this month to less than $6,000 per tonne in August.
By 9:37 am GMT, LME copper dropped by 1.1% to $6,166 per tonne, remaining just above the lowest level two months and a half touched on Friday.
Acknowledging further hiccups as the US and China are getting closer to ink a deal, the resulting uncertainty could weigh more on metal markets, Bank of China International commodity markets strategy head Fu Xiao was cited by Reuters.
“From a trading perspective, we should always keep in mind [that] there could be lots of volatility heading towards us,” Xiao said.
On the other hand, some economic indicators from China were still seen as positive for metals demand in the first quarter of 2019, according to Shanghai Metals Markets general manager Ian Roper.
“So far this year, especially in demand, it’s getting more positive in China and more bearish in the rest of the world,” Roper said, noting that “positivity towards China is coming back quite strongly.”
