Onome Amuge
Copper prices concluded the trading week with mixed performance on Friday, as global markets continued to digest the implications of a pivotal US decision to exempt refined copper from a proposed 50 per cent import tariff. While the exemption offered some relief to a market rattled by protectionist measures, concerns about a potential supply glut in international warehouses continued to weigh on sentiment.
Three-month copper on the London Metal Exchange (LME) edged up marginally by 0.16 per cent to $9,626.5 per metric tonne, but was still poised to end the week down 1.46 per cent. Concurrently, the most-traded copper contract on the Shanghai Futures Exchange (SHFE) dipped 0.32 per cent to 78,190 yuan ($10,847.97) a tonne, set to conclude the week with a 1.12 per cent loss.
The copper market has been in a state of adjustment since US President Donald Trump announced that refined copper would not be subject to the hefty 50 per cent tariff previously considered. This exemption has had a dramatic effect on the COMEX premium over the LME, almost entirely eliminating it, according to analysts at ANZ in a recent note.
“There is a real risk that some copper sitting in COMEX warehouses will be re-exported to international markets, putting downward pressure on copper prices,” ANZ analysts warned. This concern is amplified by the extraordinary events earlier in the week, where copper trading on COMEX was temporarily suspended on Wednesday after prices plunged more than 20 per cent in a single hour, indicative of severe market dislocation.
Should LME copper continue to trade at a healthy premium over COMEX, it could incentivise further increases in global copper stockpiles. This is a critical point of concern, given that inventories have already climbed 50 per cent in July.
On the supply side, data indicated a decline in output from the world’s largest copper producer. Chile’s copper production fell by six per cent year-on-year in June, which typically would offer price support. However, demand concerns continued to cast a shadow over the market, particularly stemming from China, the largest consumer of industrial metals. China’s manufacturing activity contracted in July, signaling a slowdown in the nation’s industrial engine. New export orders in China also declined for a fourth consecutive month, and falling production led factories to implement job cuts during the period, further underscoring weakening demand signals.
In other London metal markets, aluminium gained 0.14 per cent to $2,568.5 a tonne. Conversely, nickel lost 0.27 per cent to $14,895, lead declined 0.33 per cent to $1,964, tin eased 0.14 per cent to $32,665, and zinc remained flat at $2,760.5.
On the Shanghai Futures Exchange, the trend was largely negative across base metals. SHFE aluminium lost 0.46 per cent to 20,475 yuan, nickel fell 0.67 per cent to 119,670 yuan, lead decreased 1.1 per cent to 16,625 yuan, tin dipped 0.72 per cent to 264,250 yuan, and zinc eased 0.38 per cent to 22,355 yuan.
