Shanghai copper pares losses amid rate cut optimism; trade tensions on watch

Shanghai copper trimmed early losses on Tuesday, supported by growing expectations of further U.S. Federal Reserve rate cuts, as investors remained watchful of the U.S.-China trade tensions.

The most active copper contract on Shanghai Futures Exchange closed daytime trading down by 0.2% to 85,650 yuan ($12,020.55) per metric ton.

The contract was traded as low as 83,820 yuan a ton, down more than 1%, earlier this session.

The benchmark three-month copper was also recovering from the losses on Tuesday, up by 1.06% to trade at $10,690 a ton as of 0822 GMT.

The red metal found support from fresh U.S. rate cut hopes as the U.S. Federal Reserve Chair Jerome Powell’s speech on Tuesday signalled an unchanged economic outlook from weeks ago when policymakers lowered interest rates and projected two more cut this year.

Powell also pointed at the weak job market as another sign to consolidate a rate cut later this year, despite still-high and potentially rising inflation.

The U.S. dollar eased following Powell's speech, injecting fresh support for copper. A weaker dollar makes commodities traded in the greenback cheaper for investors using other currencies.

Concerns over supply shortage due to mine disruptions including the Grasberg suspension continued to support the market, limiting any decline in copper price.

Meanwhile, market remained focused on tensions in the US-China trade relationships. Fresh escalation came as U.S. President Donald Trump on Tuesday threatened to terminate some trade ties with China in relation to cooking oil.

The threat by Trump was the latest escalation in trade tensions in the run up to a high-stakes meeting between Trump and his Chinese counterpart Xi Jinping later this month in South Korea.

Both sides have also sent conciliatory signals, as Beijing stressed its rare earth export control does not constitute a full export ban, while leaving the door open for talks.

U.S. treasury Secretary Scott Bessent, meanwhile, said talks between the leaders in South Korea are still on schedule.

Elsewhere among SHFE base metals, aluminium dipped 0.24%, zinc declined 1.17%, nickel nudged up 0.37%, lead climbed 0.91% and tin was up 0.2%.

Among other LME metals, aluminium gained 0.47%, zinc nudged up 0.25%, nickel climbed 0.66%, lead increased 0.5%, and tin was up 0.36%.