Newsletter LVII - February 15th, 2025

“There′s more time than life"

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?LME Copper and Aluminum:

?A regular and positive week until Friday when Copper cash / 3rs came into 150 backwardation which shrank to 30 backwardation at the closing!

?Aluminum 2641 vs. 2632, Copper 9479 vs. 9424

?3 months. Contango curves:

?Aluminum backwardation 17 vs. 5 last week.

?Short term curve: backwardation!

?Long term curve: mixed

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?Copper contango 30 backwardation vs. 123 contango last week.?

?Short term curve

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?Long term curve:

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?Zinc $2845 vs. 2845, Nickel $15485 vs.15789,

Lead $1985 vs. 1998 and Tin $32687 vs. 31136

Economic Data

United States

• Tariffs:?No major changes in U.S. trade policy this week. The tariffs on China remain in place, continuing to affect bilateral trade relations.
• Inflation:?The PCE price index increased by?0.3% in January, keeping?annual inflation at 2.6%, while?core PCE inflation?(excluding food and energy) remained at?2.8%. This supports expectations that the?Federal Reserve?will maintain its cautious stance on interest rates.
• Consumer Confidence:?The?Conference Board's Consumer Confidence Index?fell further in February, as?12-month inflation expectations rose from 5.3% to 5.5%, reflecting persistent inflationary pressures and concerns about economic stability.
• GDP Growth:?Revised figures confirm that U.S. GDP grew by 2.3% in Q4 2024, indicating resilience despite global uncertainties.

China

• Trade & Technology:?China?continues expanding its semiconductor and AI sectors, with firms like DeepSeek launching?advanced AI models. Meanwhile, U.S.?technology export restrictions?remain in place, further escalating the tech rivalry between?Washington and Beijing.

Europe

• Economic Challenges:?The region faces?slow growth, high energy costs, and rising competition?from China and Russia, putting pressure on?industrial competitiveness, particularly in energy-intensive sectors.
• Policy & Competitiveness:?Despite initiatives like the?European Green Deal, concerns persist over?regulations and high costs?driving industries to relocate production outside Europe.

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Federal Reserve

• Fed Chair?Jerome Powell?reiterated that more evidence of?sustained disinflation?is needed before considering?monetary easing.
• Market expectations for a?rate cut in Q2 2025?have slightly?decreased, as the?Fed remains cautious amid persistent inflation concerns.

• Trade & Technology:?China?continues expanding its semiconductor and AI sectors, with firms like DeepSeek launching?advanced AI models. Meanwhile, U.S.?technology export restrictions?remain in place, further escalating the tech rivalry between?Washington and Beijing.

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Currency Movements:

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The US$ weaker against both the Euro and the British Pound.? The closing was Euro from 1.0327 to 1.0491 and British pound from 1.2409 to 1.2585.

?Stock Market Performance:

?The S&P 500 +1.4% (6114 vs. 6026), the DOW is +0.5% (44546 vs. 44303), and the NASDAQ +2.6% (20026 vs.19523).

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The Volatility of U.S. Export Tariffs and the Copper & Aluminum Markets

The fluctuations in the confirmation of U.S. export tariffs are nothing new. However, when analyzing price movements in copper and aluminum, some key trends emerge.

In aluminum, the short-term demand trend has continued, leading to the disappearance of the classic contango between nearby prices (cash/February) and the three-month contract. As a result, we now see a?$15 backwardation.

The most significant shift, however, has been in copper. Earlier this week, the contango in copper—previously around?$100?(down from the?$150?level seen in late 2024)—completely vanished. By the end of the day, this contango had flipped into a?$30 backwardation. Even more extreme was the intraday movement, where backwardation?soared to $300, marking a staggering?$250 price swing. This shift was entirely driven by cash prices, which surged past?$9,750, while longer-term contracts remained relatively stable.

Beyond this, the?COMEX-LME copper arbitrage?continued to widen until Thursday (always in favor of COMEX) for a later colapse on Friday down from $1.140 to $864 . However, this extreme volatility is not backed by fundamental demand. Instead, it is purely driven by?Hedge Fund activity. No consumption-based demand can justify such sharp price movements.

This is the reality we must face. But how should we respond??

Never passively.?Whether you were hedged or stayed out based on your market view, these fluctuations present?huge opportunities.

If you choose not to act on them, at the very least, be fully aware of what you are letting slip by.

Happy Saturday.

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Stay tuned for the next live event:? March 31st , 2025, at 12.00 pm ET

https://www.dhirubhai.net/events/tohedgeornottohedge-futuresvs-o7294390782302539776/theater/

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