Base metals experienced a downturn in trading, with copper prices declining sharply due to rising concerns that tensions between the US and Europe could escalate into a broader trade war. This potential conflict has raised fears about reduced global metals demand, triggering a risk-off sentiment in the market.
ANZ reported that market sentiment weakened further after the Shanghai Futures Exchange announced it would increase trading margins for specific copper contracts from 7 per cent to 8 per cent, effective January 22. The exchange also plans to raise trading margins and price limits for aluminium, gold, and silver, adding to the downward pressure on base metal prices.
The large speculative net-long positioning in copper amplified the price movement, prompting investors to unwind or liquidate their positions. While copper’s recent rally has been fueled by supply concerns, recent output data from BHP temporarily alleviated fears of supply tightness.
Copper prices on the London Metal Exchange last traded around $US13,000, a decrease from levels above $US13,300 recorded the previous week. The fall reflects growing uncertainty in the market and highlights the vulnerability of base metals to geopolitical and trade-related developments.
