Industrial Metals Slide on Reignited Trade Fears

By Georgi Kantchev and Amrith Ramkumar

Prices of copper and other industrial metals used in construction slid Tuesday as trade tensions between the U.S. and China continued to escalate.

Front-month copper for June delivery dropped 1.8% to $3.0465 a pound on the Comex division of the New York Mercantile Exchange -- its lowest close since May 15. Prices posted their sixth decline in the past seven sessions and have tumbled since hitting their highest level of the year earlier this month, with some investors worried that protectionist trade policies will slow the global economy and weaken commodity demand.

President Donald Trump late Monday threatened new tariffs on Chinese goods worth $200 billion. The move followed levies on $50 billion in Chinese imports to the U.S., enforced late last week aimed at punishing China for unfair trading practices.

"Fears around a potential trade war between China and U.S. resurfaced," hitting copper prices, said Sam Crittenden, analyst at RBC Capital Markets.

Copper and other commodities until recently have been relatively resilient in the face of trade tensions. But a full-blown trade war between the world's two biggest economies is a potential hazard to demand for raw materials, as China is the world's largest commodity consumer.

Elsewhere in base metals Tuesday, aluminum for delivery in three months on the London Metal Exchange declined 2.2% to $2,171.00 a metric ton. Nickel, zinc, tin and lead futures also dropped.

Heightening trade worries coincided with a strengthening dollar and a more-hawkish Federal Reserve, which raised rates last week. Many commodities are priced in dollars, and when the U.S. currency strengthens, they become more expensive to foreign investors.

On Tuesday, the WSJ Dollar Index, which measures the currency against a basket of its peers, was up 0.3%.

Among precious metals, front-month gold for June delivery edged down less than 0.1% to $1,275.60 a troy ounce. A stronger dollar and worries about higher interest rates boosting Treasury yields and making the metal less attractive have recently pushed prices to their lowest level of the year.

Write to Georgi Kantchev at [email protected] and Amrith Ramkumar at [email protected]