Copper prices have slumped amid fears that the Chinese economy is struggling to cope with the ongoing trade standoffs between China and the US.
With the disputes showing no signs of abating during a year of increasing protectionist measures from many countries, the rhetoric may finally be beginning to bite for China, as some markets are fearing the worst.
The estimations at present are that China will no longer be demanding quite as much of several commodities as its expansion under President Xi Jinping slows at home and abroad and some construction projects begin to stall.
The weight of trade war procedures is not only affecting China, however. Many US companies have found themselves at odds with President Donald Trump for impacting their business with heavy tariffs on imported steel from China.
Soybeans have also made their way onto the tariff list, a move that has seen a chain of procurement measures altered as the US tries to export its asset crops to Europe, and China sources its soybeans from other producers such as Brazil.
Copper is now another affected commodity. It fell 1% over the weekend on the London Metal Exchange (LME) to $5,973 per tonne.
Following the closing of the market for the weekend, Trump reportedly spoke to his aides and asked them to immediately proceed with levying more tariffs against China in a sign that the tit-for-tat disputes may have only just begun.
This hit the commodities markets upon their opening this week, as copper dropped a further 1.9% on digital trading platforms.
Copper is a vital cog in production for construction projects as well as electronic and power installations, and the economic disputes between two world superpowers have now seen it drop 20% since it hit its peak in June.
China is currently the largest consumer of metals worldwide, and traders believe that the current trade wars are likely to start hitting major projects sometime soon.
Data released at the end of last week appears to give some credence to these suggestions, and although there has been a rise in industrial output from the Asian nation, heavy rumors of government interference in the market to produce a stimulus are likely to only spook investors.
Caroline Bain, an analyst at Capital Economics, said that the fact that “investment data was weak” would not help the market performance of commodities and assets typically reliant on a strong Chinese economy. Bain predicted that copper is unlikely to lift any further before the end of the year and said that metals will struggle to perform better if current relations between the US and China do not improve.
The available stocks of copper are currently lower compared to mid-August, decreasing from 234,000 tonnes to just 145,400 tonnes in LME-linked warehouses. This has led to widespread suggestions of a tighter market as production drops and demand lessens.
Meanwhile, analysts at Commerzbank predicted record outputs of steel and aluminum in China despite production falling in August.
Other metals saw a mixed response from US-China trade disputes and copper’s struggle to find stability.
Zinc fell 1.1% and tin dropped 0.1% on the LME, while nickel and lead both ended up with a gain of 0.4% and 0.2% respectively.