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Trump's trade fight and the unwinding of a $3 billion bet are clobbering copper
REUTERS/Rodrigo Garrido
Copper prices on the London Metal Exchange slipped below $6,000 for the first time in a year Thursday.
Analysts say trade escalations are weighing on a market already under pressure.
An unwinding of a $3 billion long position put pressure on prices earlier this month.
Copper prices on the London Metal Exchange plummeted below $6,000 Thursday for the first time in a year as trade escalations between the US and China put the metal on track for its worst monthly drop since 2015.
The metal was down 2% to $6,020 a metric ton at 9:30 a.m. ET. Prices are now approaching a bear market, down nearly 18% since early June.
White House Economic Adviser Larry Kudlow suggested on Wednesday that Chinese President Xi Jinping was stalling a potential trade deal between Washington and Beijing. China's foreign ministry spokesperson Hua Chunying quickly pushed back, calling the accusation "shocking."
The clash further escalates a trade fight between the world's largest economies that has dragged on for months. The Trump administration enacted punitive tariffs on $34 billion worth of Chinese goods last month, prompting an in-kind response from Beijing.
Rising trade tensions have been among the main drivers of metals markets right now, according to Goldman Sachs analysts led by Hui Shan. Trump has threatened to slap additional duties on nearly all Chinese imports to the US.
"On trade, while we do not expect a full-blown trade war, uncertainties are significant and no resolutions are in sight
in the immediate future," Shan wrote in a research note.
Prices had already been under pressure, according to analysts, after an investor who built up a major long position in Chinese copper futures suddenly began to unwind their bullish bets earlier this month.
Macquarie analysts who highlighted the incident in a note last week said Chinese brokerage Green Dahua launched into the market a year ago with a $3 billion long position, which had sold down to $600 million by early July.
"The selling certainly contributed to the latter stages of copper's meltdown last week, and was likely triggered by SHFE copper moving below key levels," the analysts said.
Copper is up 3.2% year-over-year.
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