Copper prices fell overnight towards 2-1/2 month lows hit last week on worries about demand after US President Donald Trump said he would raise tariffs on Chinese goods before US-China trade talks.
Benchmark copper on the London Metal Exchange ended 0.9 per cent down at $US6,180 a tonne.
Prices of the metal used widely in power and construction last week fell to $US6,150 – its lowest since February 15.
“The sell-off on the LME is a delayed reaction to Trump’s comments over the weekend about higher tariffs,” one copper trader said, adding that a break of the 200-day moving average around $US6,190 had fuelled downward momentum.
Trump on Monday criticised Chinese trade practices, saying the United States was losing billions to the country and vowing to protect US commerce as tension escalated.
Over the weekend Trump had said he would ratchet up tariffs on $US200 billion worth of imports from China, the world’s largest consumer of industrial metals.
Vice Premier Liu He will visit the United States this week for trade talks, Chinese officials said on Tuesday, playing down the sudden increase in tensions.
INTL FCStone analyst Edward Meir said the process of “revamping US-China trade flows” would be complex and throw up many challenges.
“These now seem to be emerging and potentially could be severe enough to sink a deal altogether,” he said.
Rising stocks in LME-approved warehouses were also weighing on copper.
At 230,075 tonnes, stocks have more than doubled since the middle of February.
Partly offsetting that rise are cancelled warrants – metal earmarked for delivery – at nearly 27 per cent of the total.
“Funds trade on the headline stocks change, they don’t look at the picture underneath,” one copper industry source said.
China’s central bank on Monday said it will cut reserve requirement ratios to release about 280 billion yuan ($US41.4 billion) for some small and medium-sized banks in a move intended to help companies struggling in the face of an economic slowdown.
Prices of the metal used to galvanise steel fell 2.9 per cent to $US2,692 a tonne, having touched a two-month low of $US2,690 on concern over Chinese demand and rising supplies in the second half of the year as smelters restart and expand capacity.
“We see being short zinc as the best way to hedge a trade war,” Citi analysts said in a note.
“Zinc’s near-term window of tightness would slam shut on further global demand weakness and the LME positioning data work we have done suggests that zinc is by some distance the most long of all base metals.”
Aluminium gained 1.1 per cent to $US1,816, lead lost 1.2 per cent to $US1,855.5, tin was bid up 0.3 per cent to $US19,375 and nickel was bid 1.1 per cent lower at $US12,050.