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Copper Playing Wait and See After Recent Twist in Trade Talks

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Copper Playing Wait and See After Recent Twist in Trade Talks

What a difference a weekend makes! Last week all the talk was about a possible agreement, and end, to trade talks between the United States and China. This morning, the headlines are not so promising.

White House Ratchets Up Trade Fight – The Wall Street Journal
U.S. – China Trade Talks to Resume Despite Trump’s Tariff Threat – The New York Times
Trump has the upper hand – CNBC
US-China trade deal in doubt after Trump’s tariff threat – CNBC again

Reports out yesterday say China backtracked on commitments made during talks with the United States, prompting President Donald Trump to threaten to impose additional tariffs on Chinese goods slated to go into effect on Friday.

According to David Wilson, a commodity strategist at Freepoint Commodities, this latest twist in the trade talks has already created tougher trading conditions.

“This is very dramatic and obviously we now have this issue of we don’t know what Trump will tweet next and this is making trading metals incredibly difficult,” Wilson said, speaking at an LME Asia Week event in Hong Kong.

Last June, when the U.S.-China trade tensions first emerged, copper prices on the London Metal Exchange dropped 20 percent.

On Tuesday, LME copper fell by 1.1 percent to $6.166 per ton, holding just above 2.5-month lows hit on Friday. The exchange was closed on Monday for a holiday. More on this below.

Meanwhile, back here in the states, U.S. markets on Monday recovered most of their lost ground after a steep initial plunge, as stocks stabilized in hopes that a trade agreement could get back on track. China confirmed this morning that Vice Premier Liu He will visit the U.S. on May 9-10 ahead of President Trump’s Friday deadline.

Seeking Alpha reported this morning that even if a deal isn’t reached by the end of this week, it may not trigger a full-blown return to confrontation, with Chinese officials possibly making some overtures to the U.S. side. You can read more headlines from Seeking Alpha here.

Copper opened this morning at $2.82 a pound. That is down over 2.5 percent on the week, its biggest weekly loss since early November.

More Traditional Copper News
LME copper hit a 2.5-month low of $6,150 on Friday mainly because of computer-driven fund selling, and was trading down about one percent this morning at $6,156.

The founder of Maike Group, one of China’s biggest metals traders, told Reuters he sees benchmark London Metal Exchange (LME) copper prices recovering to $6,500-$6,600 a ton this year amid stable demand from top consumer China.

“Prices should be better in the second quarter,” He Jinbi, chairman of Maike Metals International Limited, said on Tuesday at the LME Asia Week conference in Hong Kong. “I think copper prices are relatively stable, unlike other products that are in a surplus or can’t keep up with consumption,” He added.

Further Reading

“You’re going to need a telescope to see copper prices in 2021,” Robert Friedland, executive chairman of Ivanhoe Mines is quoted as saying in this Forbes article, Copper – Well Positioned to Lead the Next Resource Cycle.

Who do you call when the doctor is sick?

Here is a Business Insider Australia article from the middle of last week’s drastic drop of copper. Copper Prices are looking sick.

 

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Jim Williams

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