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Yahoo
21-05-2025
- Business
- Yahoo
Tariff Uncertainty Fuels Copper Price Volatility
Via Metal Miner The Copper Monthly Metals Index (MMI) retraced to the downside with a 4.23% decline from March to April. Looking at copper prices today, analysts seem to be struggling with ongoing trade policy shifts. Comex copper prices have experienced wild swings over the past few months. First, they hit a new all-time high in March before plunging in April. By mid-May, they entered into a shaky sideways trend. Source: MetalMiner Insights Tariffs continue to drive the market. This month, markets have mostly been reacting to the U.S.'s most recent deals with China and the UK. Both appeared to ease concerns that the broad-based tariffs announced over recent months may prove less extreme than expected, resulting in renewed optimism about the global economy. While mostly stable, the bias appears increasingly to the downside for Comex copper prices today. This is mainly because tariff deals have yet to fully ease the demand concerns that continue to plague the market. The International Copper Study Group counts itself among those not particularly concerned about supply. Contrary to previous worries that the copper market was on the verge of growing deficit, the ICSG expects the market to maintain its surplus status in both 2025 and 2026. The group noted 'Uncertainty surrounding international trade policy that is likely to weaken the global economic outlook and negatively impact copper demand, usage growth rates have been revised down compared to the Group's September 2024 forecasts.' As a result, the surplus expectation more than doubled for 2025. Considering the surplus accumulated during 2024, this will leave the market with a significant cushion as trade policy evolves. While the raw material market remains tight, global growth prospects remain a concern. The U.S. economy shrank by 0.3% in Q1. Meanwhile, deflation remains a lingering problem for China, which is struggling to lean on domestic demand amid trade barriers in the U.S. The U.S.-China trade deal may have eased some market concerns about the impact of steep tariffs on the world's two largest economies. However, uncertainty lingers as the current agreement will expire in 90 days and still leaves a steep 30% tariff on Chinese goods. Global stocks returned to the upside in May, offering no support for copper prices today. While inventory fluctuations do not boast a strong correlation to copper prices, the rise suggests demand conditions appear relatively stable. Both SHFE and LME inventory levels experienced considerable drawdowns over recent months as material moved to the U.S. amid tariff concerns. Source: MacroMicro But while LME stocks continue to decline, SHFE stocks have started to rebound. This, alongside the continued rise in Comex stocks, has added a further drag to bullish expectations for copper prices. Among the other leading indicators for copper prices, the U.S. dollar index appeared to stabilize, halting declines that pushed the index below its long-term range in previous months. Source: MetalMiner Insights, Chart & Correlation Analysis Tool The index, which trades inversely to copper prices, has started to move sideways after regaining some of the losses accumulated in recent months. While it has fallen short of rebounding back to where it stood at the start of the year, the modest increase has seemingly weighed on copper prices over recent weeks. Investor expectations remain mixed on the future direction of the index. Speculation that the White House might favor a weaker dollar relative to other currencies added considerable weight, particularly after the Trump administration noted the strength of the U.S. dollar has come at the expense of U.S. exports. However, U.S. officials have subsequently clarified that currency policy is not part of ongoing trade negotiations. Meanwhile, the Federal Reserve has yet to blink with regard to rate cuts. Chairman Jerome Powell has remained reluctant to cut rates since last year, as tariff announcements have risked further inflation pressures in the U.S. While the most recent CPI and negotiations with China could incentivize a softer stance from the Fed, Powell has repeatedly cited 'uncertainty' as reason to hold rates steady. A cut from the Fed would add further pressure on the U.S. dollar, potentially dragging it back below its current range. This could stem further losses for copper prices today, tomorrow, and in the near future. Read MetalMiner's market outlook and copper price forecast here. By Nichole Bastin More Top Reads From this article on
Yahoo
15-02-2025
- Business
- Yahoo
Contango Signals Caution for Copper Bulls
Via Metal Miner The Copper Monthly Metals Index (MMI) held sideways, although the upside bias appeared to accelerate. In total, the index rose 1.64% from January to February, supported by rising U.S. copper prices. Keep up with the latest tariff news impacting copper prices. Subscribe to MetalMiner's free weekly newsletter. Traders continue to price the expectation of tariffs in the United States. Meanwhile, Comex copper prices closed February 10 at their highest level since October, reaching $10,163/mt. While LME copper prices are also up since the start of the year, those gains have failed to keep up with their Comex counterparts. With LME prices standing at $9,410/mt, the delta between the two exchanges now sits at a record high of $753/mt. Source: MetalMiner Insights, Chart & Correlation Analysis Tool The Comex premium appears to be almost entirely the result of market concerns, as copper imports have not yet been the subject of duties. Currently, the 25% blanket tariffs on Canada and Mexico remain on pause, and the most recent 25% tariffs only apply to steel and aluminum imports. However, traders have taken Trump's threats of more comprehensive import duties seriously. Unlike the aluminum market, which sees most trade concerns expressed in the Midwest Premium futures contract, the copper market has no comparable mechanism. The fact that demand appears strong continues to aid bullish expectations. Meanwhile, the rapid development of data centers has started to impact copper product markets. According to reports from one distributor, copper busbars, which distribute electrical power throughout those facilities, are currently under allocation. The rapid growth of AI and the electricity needed to power it has added a significant demand driver for the coming years, even as countries increasingly scale back climate and renewable ambitions. Current demand conditions aside, the raw material market offers little comfort. Treatment and refining charges (TCs/RCs), which miners pay to smelters, remain in search of a new bottom. In trading circles, low TCs/RCs indicate tightness in the raw material supply. While this is partially the result of rising smelting capacity in China, that fact will do little to assuage markets concerned about deep supply deficit projections in the years ahead. While copper prices may very well continue to trend up in the short term, the market signals are far from exclusively bullish. Historically, tariffs tend to have a short-lived impact on exchange pricing, a fact confirmed by both the U.S. steel and aluminum markets. Trump's original Section 232 tariffs, which applied respective 25% and 10% tariffs on steel and aluminum imports, were insufficient to carry the market indefinitely. Applied in March of 2018, the HRC price uptrend found a peak by the start of May before trending lower over the next two years. Meanwhile, aluminum prices continued to rise before their reversal at the close of July 2018. As copper prices spiked, China seemingly started to pull away from the market. The Yangshan copper premium, a proxy for Chinese copper demand, has fallen over 14% since its peak in mid-January. While copper demand from China's EV and solar sectors remains steady, the lack of demand from its moribund property sector offers a meaningful counterweight. Additionally, the considerably lower energy requirements of China's Deepseek AI relative to others has significantly disrupted the industry. This may once again force markets to reimagine copper demand forecasts as AI developers look to rival Deepseek's efficiency. Stop scrambling to react to rapid copper price fluctuations. MetalMiner Insights gives you the foresight to proactively plan your metal spend. Aside from certain product allocation and tightness within the raw material market, there is little evidence to suggest that the refined copper market has meaningfully tightened, at least enough to justify indefinitely higher prices. Although LME inventories have mostly trended lower since August, they remain considerably higher than in recent years and now sit near where they peaked in 2021. Meanwhile, SHFE stocks are in the middle of a rebuild. The last rebuild during 2024 saw stocks jump to their highest level since 2020. Although it was not enough to prevent the copper price uptrend throughout Q2 2024, it was among several market conditions that served to tame bullish expectations and helped prices reverse after their late May peak. As with the SHFE, Comex stocks are also on the rise. Likely aided by the widening premium over LME, copper continues to pour into the U.S. market. As of February 10, stocks stood at their highest level since January 2019, hardly a warning of an impending supply crunch. It remains worth noting that inventory levels do not meaningfully correlate to prices. While they help add to the tapestry of signals that impact market sentiment, they alone do not determine price direction. They are also not the only indicator suggesting a still well-supplied market. Both the LME and Comex copper contracts remain in contango, which may warrant caution among copper bulls. Source: MetalMiner Insights, Chart & Correlation Analysis Tool Contango, where a commodity's future price holds a premium over its spot price, is not abnormal in markets. The cost-of-carry model suggests that futures prices should trend higher than spot due to storage, financing and opportunity costs. However, that premium can indicate that spot demand is not meeting future expectations, especially if it proves atypically wide. Unlike the last copper price uptrend, which saw the Comex contract flip to backwardation, the current market shows contango. Futures regained their premium over spot prices in July and have managed to hold onto it ever since. While the spread does not appear historically high or show evidence of widening, it indicates relatively normal market conditions. Meanwhile, the LME copper contract also stands in contango. But unlike Comex, futures remain at an atypically wide premium over their spot counterparts. Since 2012, futures have averaged a $26/mt markup over primary cash prices. Currently, that premium stands at $123/mt, enough to show an unmistakable gap between the two prices on a long-term chart. Source: MetalMiner Insights, Chart & Correlation Analysis Tool In the short term, tariff concerns and the threat of their possible application remain an upside risk to copper prices. However, conditions do not yet appear to suggest the copper market fundamentals are enough to maintain a strong uptrend after investor reactions to those trade barriers begin to wear off. By Nichole Bastin More Top Reads From this article on
