Tariffs, growth fears hit industrial metal prices

Prices of industrial metals traded on the London Metal Exchange (LME) fell on Monday, with copper hitting a four-week low, as worries U.S. import tariffs would hurt growth and demand dominated sentiment.

Benchmark copper HG1! on the LME was down 0.8% at $8,975 a metric ton at 1008 GMT from an earlier $9,008 a ton, the lowest since January 6.

President Donald Trump’s plan to impose 25% tariffs on Canada and Mexico and 10% tariffs on China – the United States’ three largest trading partners – from Tuesday will slow global economic growth and demand.

Traders said tariffs on Canada and Mexico were particularly worrying as these countries are free trade agreement partners and that the market was now anticipating broader tariffs on other countries.

“We think any implementation of proposals for a universal U.S. import tariff, higher tariffs on China, as well as expected retaliatory tariffs from targeted countries will further escalate trade tensions and global growth headwinds,” Citi analysts said in a note.

Levies on shipments to the United States will also fuel increases in prices of metals in the country. This can be seen in copper prices (HGc2) on COMEX which have been trading at a premium to the LME.

COMEX copper is trading around 4.2395 cents a lb, or $9,350 a ton, a premium of around $300 over the LME price.

Elsewhere, large holdings of aluminium warrants and futures contracts and falling inventories in LME registered warehouses are fuelling concerns about tight supplies.

The discount for the cash over three-month aluminium (CMLA0-3) at around $2 a ton on Friday has dropped from above $40 in December. Meanwhile, the premium for March over the three-month (MALH25-3) aluminium contract is around $13 a ton from $1 at the start of January.

LME aluminium stocks, at 587,200 tons (MALSTX-TOTAL), have nearly halved since May last year.

Three-month aluminium ALI1! was down 0.6% at $2,578 a ton, zinc ZNC1! slipped 0.1% to $2,738, lead LEAD1! ceded 0.3% to $1,944, tin FTIN1! retreated 0.7% to $29,900 and nickel NICKEL1! lost 0.7% to $15,110.

Weighing on industrial metals overall was the stronger U.S. currency, making dollar-priced metals more expensive for holders of other currencies.

Also negative was a weaker survey of purchasing managers at manufacturing firms in top consumer China.
Source: Reuters