The uncertainty over US President-elect Donald Trump’s tariff plans is expected to keep the base metals market on its toes through the upcoming months.
Metal prices, especially that of copper, experienced volatility on Monday amid reports that Trump may be less aggressive with tariffs on imported goods.
Reports that tariff increases are to be limited to so-called ‘critical’ goods caused the price of copper to jump by almost $200 per tonne on Monday.
Copper prices had fallen to their lowest level since the beginning of August after disappointing purchasing managers’ indices from China.
The price then fell again on Monday after Trump rebuffed the Washington Post report that claimed the limited tariff increase plan.
Nevertheless, the copper price managed to hold steady at USD 9,000 per ton, which is probably due to the hope that things might not turn out quite so badly after all.
Base metal prices are sensitive to any developments in the US and China as both countries are top consumers, and also the biggest economies of the world.
Trump’s tariff plans could affect trade with China, thereby affecting demand for metals in China.
Nickel prices
Nickel prices have also had a weak start to the new year with prices slipping below $15,000 per ton mark for the first time since October 2020.
In the wake of speculation about a more moderate tariff policy from the Trump administration, it also recovered significantly and is now trading above $15,800 per ton again.
Additional support was provided by reports that the Indonesian government is considering reducing production quotas.
A press release stated that the government now wanted to analyze demand prospects.
There had already been reports in December that the Ministry of Energy and Mineral Resources could reduce the quota to 150 million tons to support prices.
“Last year, it was a good 270 million tons,” Barbara Lambrecht, commodity analyst at Commerzbank AG, said in a report.
Lambrecht said:
However, the Ministry of Finance and Investment is likely to oppose such a drastic cut. Indonesia is by far the largest supplier on the market: if production here is actually reduced, supply is likely to become scarcer and nickel prices are likely to rise.
Iron ore under pressure
On the Singapore exchange, the iron ore price came under pressure at the start of the year.
Prices fell below $100 per ton to around $97 per ton. “The Purchasing Managers’ Indices at the beginning of the year were likely the main cause of this decline,” Volkmar Baur, FX analyst at Commerzbank, said in a report.
The GDP-weighted global PMI for the manufacturing industry fell by 0.3 index points to 49.2, with the decline being geographically widespread.
Even in the most important country for industrial production, China, the PMI fell from 50.3 to 50.1.
A prolonged property crisis in China and an overall struggling economy have been weighing on demand for commodities in the country over the last one year.
“A continued decline in input and output prices suggests that demand remains weak. In recent years, this has been largely offset by higher demand from abroad and rising exports,” Baur said.
Ultimately, however, the US, alongside the EU, remains an important source of demand for Chinese goods, which could lead to problems this year in light of the upcoming change of government in the US.
However, recent data has shown that there are signs of relaxation in China’s construction sector at a lower level.
According to data, real estate sales rose slightly in December compared with the previous year, and steel output was also higher last month.
“The stabilization of the property market should limit the downside risks for iron ore prices and support a slight upward trend this year. However, the risks surrounding Chinese industrial production should also limit the fantasies of rising prices,” Baur said.
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