Copper gains as Trump looks at tariffs
Daniel Hynes
Senior Commodity Strategist | helping investors and companies navigate macro, political, economic & environmental issues
Highlights
Easing geopolitical tension weighed on sentiment across the commodities complex. More tariffs on imports boosted prices in the metals sector.?
Prices and commentary accurate as of 07:00 Sydney/05:00 Singapore/17:00(-1d) New York/22:00(-1d) London.
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Ahead Today
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Market Commentary
Copper prices surged higher as Trump ordered the US commerce department to examine possible import tariffs on the metal. The move was the latest in a string of steps aimed at imposing sector-specific levies to protect US consumers. He said the American copper industry has been decimated by global actors attacking domestic production. Copper futures on the Comex in New York rose as much as 4.9% before paring gains late in the session. This comes on the back of 25% tariffs on all imports of steel and aluminium from 12 March. The Commerce Department has up to 270 days to investigate imports and report back to Trump. The move is likely to see more copper delivered into the US in the short term. The spread between New York and London prices has been widening ever since Trump won the election, hitting a high of USD1,000/t in mid-February. It has subsequently settled down to around USD500/t. With the likelihood of a tariff significantly higher, the spread is likely to widen further in coming weeks. Copper prices were also supported by renewed supply disruptions in Chile. A country-wide power cut on Wednesday saw some of the biggest copper mines in the world halt operations. While power has been restored, some operations are only gradually resuming.
Gold prices steadied after yesterday’s sharp selloff amid a wave of profit taking by investors. The relatively short-lived correction suggests investors remain fundamentally bullish on the outlook for the metal. Momentum is no doubt being supported by strong inflows into gold-backed exchange traded funds. Last week, net inflows were the largest since 2022, according to Bloomberg data. The precious metal found some support after Trump announced in his first cabinet meeting that tariffs on EU products will be 25%.
Crude oil edged lower amid easing geopolitical tensions. The White House confirmed plans for the Ukraine’s president, Volodymyr Zelensky, to visit the US, with Trump adding that Zelensky will sign “a very big agreement”. This raised the prospect of Russian crude oil flowing more freely on the international market if a peace deal is reached. This comes following Iraq’s announcement that oil exports from the Kurdistan region would resume in coming weeks. Sentiment was also weighed down by reports of delays to tariffs on Canada and Mexico. During Trump’s cabinet meeting, he pushed back the timeline for levies on imports form the major US trading partners to 2 April. They were originally expected to come into effect next week. The fall in oil prices was contained by a relatively bullish US oil inventory report. The EIA reported that US crude oil inventories fell by 2.33mbbl last week, the biggest decline in two months and a steeper drop than the 600kbbl decrease projected by an industry report earlier this week. Implied demand for oil products rose by 1.19mb/d to 20.84mb/d.
The slump in European natural gas futures continued as Ukraine agreed with the US to jointly develop its natural resources. The agreement came before the White House announced Zelensky would be visiting the US. The market is now pricing in the prospect of a ceasefire with Russia which could lead to increased supplies of gas. Sentiment has also been impacted by warm weather, which dented gas demand.?
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Chart of the Day
With tariffs on US imports of copper hanging over the market, its not surprising that inventories in the US have been on the rise. Traders have been keen to front run any announcement by building inventories in the US. Copper stored in Comex warehouses actually started to rise around the US election and have subsequently been building ever since.
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