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Copper Prices Tumble: What’s Behind the 12% Drop Since Trump’s Election?

theguru Views  

BHP

Copper prices are on a downward trend, with analysts attributing this decline to the anticipated “America First” tariff policies of the incoming Trump administration and disappointment over China’s economic stimulus measures.

On Monday, in Chicago Mercantile Exchange (CME) trading, copper futures for December delivery fell below $9,320 per ton, marking a 1.7% drop. This represents roughly a 6% loss since Donald Trump was elected the next American president. Following a sharp rise in late September due to optimism around China’s economic stimulus, copper prices have since plummeted nearly 12%, reaching their lowest point in two months.

The metals market feels the impact of Trump and the Republican Party’s election victory. China is expected to bear the brunt of tariff increases from Trump’s “America First” policies.

With the global copper market heavily reliant on China, there is growing concern that U.S. tariff hikes will dampen trade and reduce commodity demand. As a result, major copper producers have seen noticeable stock price declines, contributing to an overall bearish copper market.

Specifically, BHP’s stock has fallen 6% since the U.S. election, pushing its year-to-date decline past 21%. Similarly, Rio Tinto and Glencore recorded 3% and 6% losses, respectively. Other producers, including Southern Copper, Freeport-McMoRan, and Teck Resources, saw drops of 3% to 8%. U.S.-traded Ivanhoe Mines and Antofagasta shares also fell by 8%, while China’s CMOC Group experienced a double-digit decline.

Marcus Garvey, head of commodities strategy at Macquarie in Singapore, predicts that if a 60% tariff is imposed on Chinese imports, China’s exports could decrease by 8%, potentially reducing next year’s GDP by 2%. Given that China accounts for over half of global copper consumption, any economic slowdown there will significantly impact copper prices and the broader commodities market. The strong U.S. dollar and slowing global growth are also expected to put further pressure on commodity markets.

Garvey notes that while commodities are often seen as an inflation hedge, current inflation is driven by an economic slowdown rather than solid demand growth or supply shocks, meaning commodities may not serve that role effectively now. He also highlights tariff implementation’s uncertainty and whether China can offset the impact through domestic stimulus measures.

Furthermore, a lackluster economic stimulus package from China’s National People’s Congress Standing Committee has declined copper’s price. The Chinese government unveiled a 10 trillion yuan (USD 1.37 trillion) support package, including raising local government debt limits to 6 trillion yuan (USD 822 billion) and allocating 4 trillion yuan (USD 548 billion) for special local government bonds. However, this focus on local government debt falls short of market expectations, as it is unlikely to boost the real estate market or consumer spending significantly.

Larry Hu, Macquarie’s chief economist for China, explains that the measures to reduce local government interest burdens amount to less than 0.1% of GDP. While these steps may mitigate risks associated with local government debt, they lack the direct demand-stimulating effects needed to drive consumer recovery.

theguru
content@viewusglobal.com

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