Base metal prices on the London Metal Exchange (LME) declined on Wednesday as investor sentiment weakened because of scant progress in US-Iran negotiations over the reopening of the strait of Hormuz and a rise in US Treasury yields.
The UAE has suspended all trade, commercial exchanges and financial transactions with Iran until further notice, marking a significant escalation in Abu Dhabi's response to repeated attacks on the country's commercial interests, including shipping through the strait of Hormuz.
The move comes as negotiations between Washington and Tehran remain deadlocked following the expiry of a 60-day negotiating deadline earlier this week. Iranian parliament speaker Mohammad Bagher Ghalibaf said on Tuesday that Tehran would not fully reopen Hormuz until Washington fulfills commitments that were contained in an earlier memorandum of understanding, including lifting the US naval blockade, releasing frozen Iranian assets and easing restrictions on Iranian oil.
US president Donald Trump has said the blockade remains in place and that no further negotiations with Tehran are scheduled. Trump also posted a graphic on social media suggesting the strait of Hormuz is a "new US territory", adding to concerns of a prolonged war in the Middle East.
The US Treasury Department announced Wednesday it was at least doubling the size of buyback operations for longer-term Treasury securities as part of its "liquidity support" buyback operations, effective 9 September. After the announcement, the yield on the 30-year note fell by 8-10 basis points to about 5.20pc from a near two-decade high on Tuesday, while the 10-year yield fell to about 4.7pc. The move comes as US bond yields have risen in reaction to energy-price fueled inflation linked to the Mideast Gulf war and increased borrowing for defense and the artificial intelligence buildout.
Downward pressure on base metals was partially offset by expectations that new Chinese measures could support downstream demand. On Tuesday, Chinese authorities released guidelines aimed at boosting domestic consumption and economic activity in county-level regions, which account for around 90pc of the country's land area, 50pc of its permanent population and 40pc of its economic output. China will also promote adoption of new energy vehicles and green smart products in these regions, while expanding charging infrastructure coverage, assistant commerce minister Yuan Xiaoming said at a press conference.
The three-month LME copper contract decreased by 1.4pc on the day to $13,890/metric tonne (t) in Wednesday's official trading session, while the Comex copper contract for the next active month — September — rose by less than 1¢/lb to $6.50/lb.
Ecuador exported 136,960t of copper concentrate in April-June, a 21pc drop on the year, central bank data show. China received 93pc of the exports, down from 96.5pc in April-June last year, while Peru received the remaining 7pc, up from 3.4pc a year before.
Three-month LME zinc moved down 1.9pc on the day to $3,652/t.
The three-month LME nickel contract decreased by $35/t on the day to $16,885/t, while three-month LME aluminum dropped by $22/t to $3,212/t.
The three-month LME lead contract saw the biggest daily drop of 2.1pc to $54,755/t, while LME lead was down 1pc to $1,872/t.
The September forward contract for WTI, the US crude benchmark, rose by 89¢/bl to $85.83/bl.
