LME lead hits 33-month low on deepening trade war

By Eric Onstad

LONDON, May 13 – Lead prices sank to the lowest in nearly three years on Monday on worries that industrial metals demand would suffer from renewed U.S.-Chinese trade tensions.

Aluminium saw the lightest losses after reports of reduced supply of raw material alumina from China.

Metals slid along with other financial markets after the trade war between the world’s top two economies ratcheted up a gear and China said it planned to boost import tariffs against $60 billion worth of U.S. goods.

“Trade frictions weigh on future demand expectations so you’re naturally going to get caution on asset allocations for commodities on the whole and base metals in particular,” said Colin Hamilton, director of commodities research at BMO Capital.

Lead was hard hit partly because seasonally this was the weakest period for lead demand while recycled supply was healthy, Hamilton added.

Benchmark lead on the London Metal Exchange slid 2% at $1,785 a tonne in closing open outcry trading, its lowest since Aug. 9, 2016.

* CHINESE ALUMINA: Alumina output would be curtailed in China’s Shanxi province due to environmental issues, according to reports. “To me, it looks like that’s going to take out about 4% of Chinese alumina capacity,” Hamilton said.

* ALUMINIUM PRICE: Reduced alumina supply and higher prices for the raw material to make aluminium helped to lift three-month aluminium, the only LME metal in positive territory, by 0.1% to end at $1,809 a tonne.

* COPPER PRICES: LME copper fell 1.9% to finish at$6,011 a tonne, the weakest since Jan. 29. The net speculative short position on the LME had expanded to 2.1% of open interest, back to levels not seen since late January, Alastair Munro at broker Marex Spectron said in a note.

* COPPER SMELTER MAINTENANCE: Copper prices could gain some support from falling output in China as some smelters there are scheduled to go into maintenance in May, said copper analyst He Tianyu of metal consultants CRU.

* COPPER DEFICIT: The copper market should see a deficit of 189,000 tonnes this year, widening to 250,000 tonnes in 2020, the International Copper Study Group said.

* CHINA CARS: Also weighing on metals prices was data showing that vehicle sales in China, the world’s top auto market, fell 14.6% in April annually, marking the 10th consecutive month of decline.

* OTHER PRICES: LME zinc dropped 2.4% to finish at$2,567 a tonne, the lowest since Jan. 22, tin fell 1.5% to $19,325 and nickel, untraded in closing rings, was bid down 1.3% to $11,770.

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(Additional reporting by Mai Nguyen in Singapore; editing by Emelia Sithole-Matarise and Stephen Powell)

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