Copper is flashing a powerful warning about expectations for global growth as a trade war between the world’s two biggest economies escalates.
Prices have lost more than US$1,000 per tonne since touching a four-year high on June 7 in the steepest four-week loss since 2011.
Copper on Friday fell with most metals as US President Donald Trump slapped tariffs on US$34 billion of Chinese imports, prompting Beijing to retaliate in kind.
“Metal prices have dropped tremendously in the past few weeks, and investors are very nervous about whether this will escalate into a full global trade war,” ABN Amro Bank NV senior sector economist Casper Burgering said by telephone from Amsterdam, the Netherlands.
“That nervousness is reflected in the copper price especially, given its role as a barometer of the global economy,” he added.
Copper for delivery in three months fell 1 percent to settle at US$6,282 at 5:50pm on the London Metal Exchange, marking the biggest weekly slump since 2015. Prices are down 13 percent in the past month.
Metals have performed poorly in the past few weeks, with zinc entering a bear market, on concern that the litany of trade disputes initiated by Trump will escalate and harm the global economy and demand for commodities.
In the run-up to Friday’s tariffs, Bank of England Governor Mark Carney said the rise of protectionism would hurt trade flows, push up import costs and affect confidence, investment and demand.
The yuan’s recent slump and signs of deteriorating sentiment in China have also contributed to copper’s slide, but by year-end tighter supplies should help prices rebound, Burgering said.
“Over the summer, prices will remain very volatile and I don’t see any uptick in the next few months, but by the fourth quarter the fundamentals will take control again,” he said.
If conditions deteriorate dramatically in the Chinese market, authorities there will look to stimulate the economy to prop up growth, BMI Research analysts said in an e-mailed note.
While that is unlikely to increase infrastructure spending directly, it would support economic growth and therefore metals demand, they said.
Lead, nickel and tin declined, while aluminum was unchanged and zinc rose.
In New York, gold dropped US$3 to US$1,255.80 per ounce and silver slipped US$0.03 to US$16.07 per ounce.
US crude oil prices reversed an early slide, with benchmark US crude gaining US$0.86, or 1.2 percent, to settle at US$73.80 per barrel in New York.
Brent crude, used to price international oils, fell US$0.28 to close at US$77.11 per barrel in London.
In other energy futures trading, heating oil slipped US$0.01 to US$2.17 per gallon and wholesale gasoline lost US$0.02 to US$2.11 per gallon, while natural gas rose US$0.02 to US$2.86 per 1,000 cubic feet.
Additional reporting by AP
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