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METALS-Copper and other metals dragged down by trade fears

Zandi Shabalala

* GRAPHIC-2019 asset returns: http://tmsnrt.rs/2jvdmXl (Updates throughout, changes dateline from MANILA)

LONDON, May 9 (Reuters) - Prices for copper and other metals retreated on Thursday, hit by the potential for escalating trade tensions as the United States and China prepare to resume talks to resolve their long-running trade conflict.

The two sides will hold two-day negotiations in Washington from Thursday, with U.S. President Donald Trump having threatened last Friday to increase tariffs on $200 billion of Chinese goods.

Benchmark copper on the London Metal Exchange slipped by 0.4 percent to $6,121 a tonne in official rings, having touched a February low of $6,099.

"The market feels jittery right now. It's hard to make a commitment ahead of a binary outcome and you are seeing that in the market," said Citi analyst Oliver Nugent, adding that he still expects a trade deal to be concluded.

"Our base case is the trade deal will still be done and we see (Trump's threats for higher tariffs) as more of a negotiation tactic rather than something that is going to last."

The bruising trade war, which has slowed the global economy, is clouding the demand outlook from top metals consumer China.

Meanwhile, Chinese bank loans slowed in April after a record first quarter, sparking hopes of further government stimulus.

TRADE: Ahead of the talks, Trump said that China "broke the deal" in negotiations with Washington and vowed not to back down from new tariffs on Chinese imports unless Beijing "stops cheating our workers".

POSITIONING: The speculative long positioning in COMEX copper has been completely liquidated in the week to Tuesday and the metal now exhibits a net short of 22,600 lots, according to broker Marex Spectron.

STOCKS: Headline copper stocks in LME-approved warehouses <MCUSTX-TOTAL> fell by 9,225 tonnes to 217,975 tonnes, according to data on Thursday, but are still significantly higher than a low of 111,775 tonnes in March.

IRAN: Trump imposed new sanctions on Iran, targeting revenue from its exports of industrial metals in the latest salvo between Washington and Tehran over a 2015 international accord curbing the Islamic Republic's nuclear programme.

The U.S. sanctions on Iran covers the iron, steel, aluminium and copper sectors, a White House statement said.

NICKEL SPREADS: The discount on cash nickel compared with three-month metal fell to $40 from about $70 at the beginning of May, indicating tight supply. This was the tighest discount since January. <MNI0-3>

Nickel is expected to show a deficit of 84,000 tonnes in 2019, compared with a shortage of 146,000 tonnes last year, the the International Nickel Study Group says.

PRICES: LME aluminium fell to its lowest since January 2017 and was steady in official rings at $1,799 a tonne.

Zinc was bid down 1.1 percent to $2,619, lead shed 0.8 percent to $1,866, tin was down 0.7 percent at $19,275 and nickel lost 1.5 percent to 11,755.

(Additional reporting by Enrico dela Cruz Editing by David Goodman)