Copper Bounces Back After Trade Pummeling

Date : 07/12/2018 @ 8:15AM
Source : Dow Jones News
Stock : Freeport-Mcmoran, Inc. (FCX)
Quote : 15.75  -0.05 (-0.32%) @ 7:55PM
Freeport-McMoRan Inc. share price Chart

Copper Bounces Back After Trade Pummeling

Freeport-McMoRan Inc. (NYSE:FCX)
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1 Month : From Jun 2018 to Jul 2018

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   By David Hodari 
 

Copper prices rallied Thursday, after receiving a pummeling on Wednesday as the latest tariff threats from China and the U.S. amplified worries about the impact of a trade dispute on the global economy.

The base metal was up 0.9% at $6,192 a metric ton in late morning trade in London, after shedding as much as 4% on Wednesday to hit its lowest point in almost a year. Copper futures have plunged 17% from a four-year high in June, bringing it close to a bear market.

Gold also climbed, ticking up 0.2% to $1,244.26 a troy ounce, recouping some of the losses from Wednesday as the effects of a stronger dollar outweighed that of the global risk-off sentiment.

Global equities markets--including those in China--and most commodities staged a resurgence Thursday after coming under heavy pressure the previous day after the White House said Tuesday that it will assess slapping fresh 10% tariffs on $200 billion in Chinese goods. China threatened to match U.S. tariffs with its own countermeasures.

Those geopolitical and macroeconomic considerations appeared to be outweighing copper-specific factors, with traders apparently disregarding stories that would normally weigh on prices.

Freeport-McMoRan Inc. (FCX) and the Indonesian government struck an "initial agreement" on Thursday for the joint-owned copper mine at Grasberg to move toward state ownership. State-owned PT Indonesia Asahan Aluminium (Inalum) will receive a 51% stake, raising the state's holding from around 9%. Grasberg has the world's largest gold deposits and the second-largest copper mine.

Freeport's share of the payment will be $350 million, while Rio Tinto PLC (RIO) will take $3.5 billion for its stake.

The deal sees one of the copper market's largest source of uncertainty in recent years move one step closer to its conclusion with the agreement bringing an "increase the security of copper concentrate supply on the world market," analysts at Comemrzbank said in a note.

Similarly, BHP Billiton PLC (BLT.LN) handed a proposal for a new labor contract to the union at its mine at Chilean Escondida--the world's largest--that includes inflation-linked salaries and a $23,000 bonus for each worker, according to Reuters.

The 44-day strike that supported copper prices last year has weighed on investors' minds in recent months, with some market participants using the negotiations as a key plank in early 2018 forecasts for higher copper prices. Talks have proved smoother than expected, though.

While the offer falls short of recent union demands, geopolitical pressure on copper prices makes BHP's offer more palatable to miners, according to John Meyer, an analyst at SP Angel.

Investors were monitoring those negotiations and any further trade news out of Washington and Beijing.

Among base metals, zinc rose 0.43% to $2,575, tin traded 0.7% higher at $19,490, and nickel was up 2.76% to $14,330, with all prices for a metric ton. Aluminum fell 0.02% to $2,060 a metric ton, while lead declined 2.56% to $2,147.50.

Among precious metals, silver rose 0.57% to $15.88, platinum was 0.53% higher at $832.86 and palladium climbed 0.15% to $942.88, all per troy ounce.

 

Write to David Hodari at david.hodari@wsj.com

 

(END) Dow Jones Newswires

July 12, 2018 08:00 ET (12:00 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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