LME copper gains but trade war concerns weigh

LME copper prices edged higher on Tuesday after a sharp pullback in the previous session, but gains were limited due to escalating trade war concerns as the U.S. and China imposed tit-for-tat tariffs.
Benchmark copper added 0.6% to $9,155 a metric ton as of 0717 GMT. The metal fell to a four-week low on Monday.
China’s finance ministry announced a package of tariffs on a range of U.S. products in an immediate response to a 10% tariff on Chinese imports.
Trump suspended his threat to impose steep tariffs on Mexico and Canada for a month, but the 10% trade barrier on Chinese imports came into effect on Tuesday, risking a renewed trade war between the world’s top two economies as Trump punishes China for not halting the flow of illicit drugs.
“Everything is about the risks of a trade war at the moment, with copper especially sensitive. Tariffs are an inevitable drag on economic activity and that will always lead to weaker demand for base metals,” said Kyle Rodda, senior financial markets analyst at Capital.com.
China is the biggest consumer of industrial metals.
The dollar index fell 0.2%, making greenback-priced commodities cheaper for holders of other currencies.
U.S. companies will look to the Middle East and India for more aluminium and to Chile and Peru for copper in case they have to circumvent tariffs in future.
Meanwhile, recent data showed that China’s factory activity grew at a slower pace in January. The Caixin/S&P Global manufacturing PMI slipped to 50.1 in January from 50.5 the previous month.
Three-month aluminium was steady at $2,623.5. LME zinc gained 0.6% to $2,816 a ton, tin added 0.3% to $30,020, lead climbed 0.2% to $1,948.5, while nickel lost 0.6% to $15,115.
The Shanghai Futures Exchange is closed for the Lunar New Year holidays. Markets will resume trade on Wednesday, Feb. 5.
Source: Reuters