16-08-2018

Metals Poisoned by Turkey Contagion as Copper Nears Bear Market

From Turkey’s financial crisis to China’s trade war, the emerging-market contagion is infecting metal markets.

Base metal markets tumbled on Wednesday, with most contracts falling more than 2 percent in London. Copper sank below $6,000 a metric ton and is now approaching a bear market. Not even gold, the usual safe haven, was spared from the selloff. Bullion prices sank 0.7 percent to $1,186 an ounce. Natural resource shares were also in the red.

“It’s going to be difficult to shake this bearish sentiment,” Nicholas Snowdon, a metals analyst at Deutsche Bank AG, said by phone from London. “When you look at the broad selloff across metals, the key drivers are clearly macro factors.”

There’s a growing fear that problems in China and Turkey will lead to weaker global economic growth, and consequently hurt demand for raw materials. Losses on Wednesday were triggered by a broad retreat in China as the yuan weakened and recent data showed the economy hit a rough patch.

In copper, prices were also hit by speculation that the wage talks at the world’s biggest copper mine will end without a strike. BHP Billiton Ltd. and the union at Escondida agreed to put a new offer to a vote by workers, potentially saving the industry from supply disruptions.

Adding to the bearish sentiment are more signs that Turkey’s economic woes have spread. Indonesia’s central bank surprised most economists with an interest rate hike on Wednesday as the country moved to contain volatility and curb a slide in the currency.

Commodities have been battered for months by worsening trade tensions between China and the U.S., the world’s two largest economies. The Bloomberg Commodity Index has lost 9.3 percent from a recent peak in May.

Sentiment among traders is also turning negative. Money managers have a short position of about 83,000 copper futures and options, near an all-time high, according to data from the U.S. Commodity Futures Trading Commission.

Commodity Prices
-Copper dropped 2.7 percent to $5,881.50 a ton, the lowest since July 2017.
-Aluminum retreated 2.4 percent to $2,021 a ton.
-Zinc fell the most among major commodities, losing 4.5 percent to $2,343 a ton. Prices are near a two-year low.
-Platinum sank 2.3 percent to $783 an ounce.
-Oil slid 1.3 percent to $66.14 a barrel.

Source: Bloomberg

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