March 22, 2018 / 10:52 AM / a year ago

METALS-Copper rallies, but trade war angst keeps it near 3-month low

* LME/ShFE arb:

* GRAPHIC-2018 asset returns:

* U.S. aluminium premiums back below 19 U.S. cents/lb (Recasts, adds comment, changes dateline from Melbourne)

By Pratima Desai

LONDON, March 22 (Reuters) - Copper rallied on Thursday as the dollar slipped, but concern about U.S. tariffs on Chinese imports and the possibility of a trade war kept prices near three-month lows.

Benchmark copper on the London Metal Exchange was up 0.4 percent at $6,819 a tonne at 1036 GMT. Prices of the metal used widely in power and construction touched $6,702 on Wednesday, the lowest since the middle of December.

“The dollar is under pressure so you are seeing a bit of a bounce in copper,” INTL FCStone analyst Edward Meir said.

“This whole thing with tariffs is going to drag on and create uncertainty. If it escalates in terms of retaliation, we’re quickly going to move into a slow growth, high inflation and high interest rate environment”.

DOLLAR: The dollar slid after the U.S. Federal Reserve issued a forecast for future policy that was less hawkish than expected. The Fed raised U.S. rates to 1.75 percent from 1.50 percent and signalled two more hikes for 2018. Dollar bulls were expecting four rate hikes in 2018.

A lower U.S. currency makes dollar-denominated commodities cheaper for holders of other currencies, which potentially could boost demand.

CHINA TRADE: China accused the United States of “repeatedly abusing” trade practices, as Beijing braced for U.S. President Donald Trump’s tariffs on Chinese imports worth up to $60 billion, due later on Thursday.

TECHNICALS: Upside resistance for copper comes in at $6,935 near the 21-day moving average, followed by $6,960 near the 100-day moving average. Support is at Wednesday’s $6,702 low and $6,675 the 200-day moving average.

TAXES: Canada’s First Quantum Minerals is hopeful of resolving a dispute with Zambia over a massive 76.5 billion Zambian kwacha bill for unpaid duties on imported mining equipment.

ALUMINIUM TARIFFS: Market watching to see which other countries apart from Canada and Mexico might be exempted from a 10 percent tariff on aluminium planned by Trump.

ALUMINIUM PREMIUM: Premiums for aluminium in the United States climbed above 19 U.S. cents a lb earlier this month, the highest levels since March 2015, on worries about shortages of the metal used in transport and packaging.

News of exemptions, particularly for Canada the biggest supplier to the U.S., has seen the premium slide back below 19 cents a lb. The premiums traded on the CME are used to hedge aluminium exposure on the physical market.

PRICES: LME aluminium was up 0.3 percent at $2,088 a tonne, zinc slipped 0.6 percent to $3,230, lead fell 0.5 percent to $2,387, tin ceded 0.6 percent to $20,855 and nickel gained 0.5 percent to $13,530.

Editing by Alexander Smith

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