Copper Flounders Ahead of Iran Decision

By Benjamin Parkin and David Hodari

Copper prices fell as geopolitical uncertainty loomed over metals markets.

Traders were looking ahead to President Donald Trump's pending announcement on whether the U.S. would withdraw from the nuclear deal with Iran, due Tuesday afternoon. Concerns that any subsequent instability could have a knock-on effect for the global economy were weighing down the copper market, participants said.

"It seems highly likely that he will pull out of the deal, but it is unclear what kind of actions will accompany that," said Tai Wong, head of metals trading at BMO Capital Markets. "It's keeping markets a little careful, particularly base metals."

July-dated copper contracts fell 1.8% to $3.024 per pound at the Comex division of the New York Mercantile Exchange, trading at the lowest point in over a month. Prices initially rose in Asian trading Tuesday before turning lower as traders in Europe and North America came to work. U.S. prices are down more than 8% for the year so far.

"The bears are in control," said Alex Turro, a market strategist at RJO Futures. "The path of least resistance is down."

Metals traders were closely watching the U.S. dollar and crude oil prices ahead of President Trump's announcement. The greenback was higher on Tuesday morning, with the WSJ Dollar Index up 0.4% to 86.67. A recent rally in the dollar has hurt prices for commodities like copper, making them less attractive to global buyers.

Crude oil, meanwhile, fell after a multimonth rally carried prices above $70 a barrel for the first time since 2014. Analysts said another uptick in crude prices, particularly if traders bet that U.S. efforts to dismantle the Iran deal could lead to tighter global supply, may help copper prices recover some recent losses as money flows back into the commodity sector.

Traders on Tuesday were also parsing signs of Chinese demand, a major market mover. Commodity import data out of the world's largest copper consumer was a mixed bag, analysts said. Volumes rose over 15% in the first four months of 2018 from a year earlier, according to consultancy Capital Economics, and were slightly higher from March to April.

While some said those figures were better-than-expected, others said it pointed to a lukewarm outlook for the Chinese economy in the months to come.

"There are signs that growth in China's commodity imports is softening, which is consistent with our view that economic activity will slow over the course of this year," Capital Economics said in a note.

Gold prices also fell, weighed down by the higher dollar. June contracts traded 0.4% lower at $1,309 a troy ounce. A heightened sense of risk if the U.S. does leave the Iran agreement could help the market retrace its losses, said RJO's Mr. Turro.

Write to Benjamin Parkin at [email protected] and David Hodari at [email protected]