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Copper prices fall on fears of tariffs affecting US demand

The copper price fell on Friday, as investors feared that a 50% tariff would be levied on U.S. imports of the metal. Speculators also unwound their positions.

The London Metal Exchange's three-month copper was down 0.8% at $9,622 a metric ton as of 0915 GMT. This is down from the peak reached on July 2 for the last three months, which was $10,020.50.

The contract was expected to drop about 2% in the second week of this year.

Carsten Menke is an analyst at Julius Baer, Zurich.

"Another aspect, I believe, is the re-evaluation of the situation by speculators who need to now reassess a situation that was quite bullish previously."

Menke believes that the LME will return to $9,000 per ton, or less.

In recent months, speculators have driven up the price of U.S. Copper on the expectation of tariffs after an announcement was made in February that an investigation would be conducted into import duties.

COMEX copper prices reached an all-time high of $5.90 per lb after the announcement of the 50% levy, but fell on Friday by 1.4% to reach $5.51. This brings the COMEX premium over LME copper up to $2,532 per ton or 26%.

Analysts said that the COMEX price was also affected by an overhang of inventory after traders sent roughly a year's supply of copper to the United States to avoid the tariff.

Investors also faced uncertainty, including which products would be subject to the tariffs and whether certain countries could get exemptions.

The Shanghai Futures Exchange's most traded copper contract edged up 0.05% to 78.430 yuan (10,937.87), though it ended the week with a loss of 2.05% after two consecutive weeks in which the contract had gained 2.8%.

Other metals include LME aluminium, which fell by 0.4% to 2,598 per ton. Nickel also dropped 0.3%, to $15,230. Zinc lost 0.6%, to $2760. Lead was down by 0.7%, to $2029, and tin by 0.8%, to $33,305.

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(source: Reuters)