MANILA - Prices of industrial metals dropped on Thursday, with copper hitting its lowest in nearly three months, as investors shied away from riskier assets amid mounting tensions ahead of crucial trade talks between the United States and China.

The two sides will hold two-day negotiations in Washington from Thursday, with U.S. President Donald Trump threatening to increase tariffs on $200 billion worth of Chinese goods on Friday. 

The bruising trade war, which has slowed the global economy, is clouding the outlook for demand from top metals consumer China.

Ahead of the talks, Trump said China "broke the deal" in negotiations with Washington and vowed not to back down on imposing new tariffs on Chinese imports unless Beijing "stops cheating our workers". 

Benchmark copper on the London Metal Exchange was down 0.3 percent at $6,132.50 a tonne by 0329 GMT, after touching its lowest since Feb. 15 at $6,114.50.

Aside from the tariff hike on Friday, Trump also upped the ante by saying he would impose 25 percent tariffs on the remaining $325 billion of Chinese goods imported into the United States.

Trump's tariff measures "threaten to take the trade war to the worst-case 'conflagration' scenario that we considered last year," said Steve Cochrane, chief APAC economist at Moody's Analytics.

"It is in the interests of both sides to bring the trade negotiations to a close and focus on policies appropriate for economic stability," Cochrane said.

 

FUNDAMENTALS

* SHANGHAI COPPER: The most-traded copper contract on the Shanghai Futures Exchange  fell as much as 0.8 percent to 47,550 yuan ($6,989.15) a tonne.

* IRAN: Trump on Wednesday imposed new sanctions on Iran, targeting revenue from its exports of industrial metals, the latest salvo in tensions between Washington and Tehran over a 2015 international accord curbing the Islamic Republic's nuclear programme. 

* The U.S. sanctions on Iran covers iron, steel, aluminium, and copper sectors, a White House statement said.

* PRICES: ShFE zinc dropped as much as 1.8 percent, while London zinc dipped 0.5 percent to $2,635.50 a tonne. ShFE nickel lost as much as 1.1 percent and London nickel CMNI3 was down 0.5 percent.

* GRAPHIC: The world's biggest diversified miners have yet to see their share prices reflect their role as providers of the minerals needed for a shift to a low-carbon economy.

 

($1 = 6.8034 Chinese yuan renminbi)

 

(Reporting by Enrico dela Cruz; Editing by Shreejay Sinha and Joseph Radford) ((enrico.delacruz@tr.com; +632 841-8934; Reuters Messaging: enrico.delacruz.thomsonreuters.com@reuters.net))

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