Base metals lose 12-27% value on trade war fears in last two months

Fees that miners pay to smelters to process their metal have jumped
Base metals have lost as much as a fourth of their value in the last two months owing to weak global demand in the wake of escalating trade war between the US and China.

The base metals index (LMEX) on the benchmark London Metal Exchange (LME) has slumped 17.5 per cent since the drawdown started on June 7, this year. Zinc led the fall in base metals complex, with 27.3 per cent decline in its price to $2,338 a tonne, on the LME on Thursday. Lead and copper followed suit with a sharp 21.3 per cent and 19 per cent fall in prices, respectively, since June 7. 

Other metals such as nickel and aluminium are also down by 17 per cent and 14 per cent, respectively.

The decline in base metals' prices is set to affect the profitability of their primary producers in the July-September quarter. With growing cost of production, primary producers were earlier seen heaving a sigh of relief owing to rising metal prices, which had rebounded after a prolonged cyclical downtrend.

"Base metals continues to trade weak, coupled with the US-China trade tariff and the strengthening US dollar, that powered to a 13-month high on concerns over the ripple effects of a slide in the Turkish lira, while global trade disputes continued to sap demand. DXY (US Dollar index), which took its cue to climb from concerns over the plunging Turkish lira and the Russian rouble was later bolstered by strong US data that cemented expectations for two more interest rate hikes this year," said Navneet Damani, associate vice-president, Motilal Oswal Securities.