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An escalation in the trade spat between China and the United States shook sentiment in the base metals market, with reports late last week that US President Donald Trump is planning to implement fresh tariffs on $200 billion worth of Chinese goods this week.
“[Trump] also criticised the [Chinese] government’s management of the yuan, saying they have devalued the currency in response to recent slowdown in economic growth,” ANZ Research noted on Monday.
“This weighed on sentiment in the base metals sector,” it added.
Adding further fuel to investors’ concerns was the stalling of trade talks between the US and Canada and subsequent series of tweets from Trump with a threat to exclude Canada from the North American Free Trade Agreement if more favorable terms were not met.
“The markets have made a nervous start in the Asian session as once more a presidential tweet has unnerved investors. This time it was the threat of excluding Canada from Nafta if terms were not more favorable to the USA or indeed that if Congress interferes with negotiations President Trump states that he will simply terminate the whole Nafta agreement,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning note.
“This of course has ignited further tensions about a possible further escalation of the tariff ‘war’ between the USA and China…” Freeman added.
In addition, a stronger dollar has added to the downside pressure currently forcing base metals prices on the SHFE lower; the dollar index stood at 95.18 as at 10am Shanghai time, this compares with a reading of 94.77 at roughly the same time last Friday.
As a result the SHFE base metals were broadly down in the early session, with nickel leading the complex lower. Nickel’s most-traded November contract fell to 104,700 yuan ($15,327) per tonne as at 10am Shanghai time, down by 2.7% or 2,900 yuan per tonne from last Friday’s close.
“The main reason for the decline was the global trade tensions, which fueled negative sentiment in the market,” a Shanghai-based nickel analyst.
Copper also fell heavily during the morning session, with the red metal’s most-traded October contract sliding 1% to 48,080 yuan per tonne.
Bucking the general weakness was lead which drifted higher as it found support from tightness in the Chinese secondary lead market following a shutdown of a number of refineries in China during environmental inspections last month.
“The Chinese lead market is a little bit isolated from the international one. The main reason for its prices edging higher is the reduced output from secondary lead smelters in China. The new round of environmental inspections in the country affected many smelters in major lead-producing provinces,” a Shanghai-based lead analyst told Metal Bulletin.
Base metals prices
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