METALS-China metals tumble after trade war retaliation; London metals rebound on arbitrage trading

SHANGHAI, April 7 (Reuters) - Base metal prices in China tumbled on Monday amid escalating trade war concerns and recession fears, while most London metal prices rebounded on arbitrage trading after the Asian market opened, increasing liquidity.

The most-traded copper contract on the Shanghai Futures Exchange (SHFE) dropped 6.0% to 74,440 yuan per metric ton as of 0338 GMT, hovering near its lowest level in over three months since January 3.

"The retaliatory tariff makes us worry about trade war, which will impede economic growth globally," a metals trader said.

Top metals consumer China hit back on Friday with additional 34% tariffs on all U.S. goods from April 10, after U.S President Donald Trump imposed a 34% tariff on most Chinese goods as part of his sweeping reciprocal tariff program.

Meanwhile, the benchmark three-month copper CMCU3 on the London Metal Exchange (LME) along with most other metals, reversed its downtrend after the SHFE market opened, driven by arbitrage trading.

"When the SHFE market opens, arbitrage traders can actively trade on both SHFE and LME, capitalizing on the price gap to generate profit. Their activity increases market liquidity, which in turn pushes LME metals prices higher," a base metals trader said.

The traders requested anonymity as they were not authorised to speak to the media.

Arbitrage trading between LME and SHFE happens when traders buy metal on the exchange where it's cheaper and sell it where it's more expensive, profiting from the price difference.

SHFE aluminium SAFcv1 slid 2.9% to 19,835 yuan a ton, zinc SZNcv1 lost 1.6% to 22,775 yuan, lead SPBcv1 fell 1.7% to 16,910 yuan, while nickel SNIcv1 was down 5.5% to 121,180 yuan, tin SSNcv1 fell 6.0% to 275,420 yuan.

Among other metals, LME aluminium CMAL3 added 1.6% to $2,416.5 a ton, lead CMPB3 rose 0.5% to $1,915, zinc rose 1.6% to $2,698.5, tin CMSN3 was down 1.3% at $34,925 and nickel CMNI3 was down 0.2% at $14,735 a ton.

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