December copper came under renewed pressure on Monday, falling some 1.7% to under $4.23 per pound ($9,320 per tonne) in afternoon trading on the CME in Chicago, bringing losses since a Trump victory became clear to close to 6%.
The bellwether metal spiked at the end of September on optimism about Chinese economic stimulus, but is now down nearly 12% since then and is set to close Monday at a two-month low.
Trump and the Republicans’ election sweep and the implications for commodities have brought volatility to metals markets and investors in major copper producers have taken a decidedly bearish turn.
Stock in BHP traded down again in heavy volumes on Monday and has now fallen 6% since the US vote bringing the top listed producer’s decline year to date to over 21%. For the world’s number two miner Rio Tinto, the declines are 3% and 16%, respectively.
Since the close on November 5, Glencore and Southern Copper are down by 6% and 8% respectively in New York, Freeport McMoRan has given up 5% of its value while Teck Resources’ decline has been more modest at just over 3%. Lower down the producer rankings the sell off was sharper with Ivanhoe Mines shares and Antofagasta units trading in the US both down 8%, and over the counter shares of China’s CMOC Group showing double digit declines since the vote.
In a new trading desk note Marcus Garvey, head of Macquarie commodities strategy based in Singapore, quotes the bank’s economists as saying the potential for a 60% tariff on all imports from China, if combined with broad based tariffs that restrict trade reshuffling, could reduce China’s exports by 8% and consequently reduce China’s GDP by 2% in 2025. China consumes more than half the world’s copper.
“Such a slowdown in global growth would clearly be bearish for aggregate commodity price performance, reinforced by its bullish implications for the US dollar. Indeed, though commodities are often seen as an inflation hedge, in this instance – where inflation is neither driven by strong demand growth nor a negative commodity supply shock – they would struggle to live up to that reputation.”
Marcus Garvey
“Such a slowdown in global growth would clearly be bearish for aggregate commodity price performance, reinforced by its bullish implications for the US dollar. Indeed, though commodities are often seen as an inflation hedge, in this instance – where inflation is neither driven by strong demand growth nor a negative commodity supply shock – they would struggle to live up to that reputation.”
Macquarie notes that the details of and mechanisms for tariff implementation remain uncertain, as does the extent to which China’s authorities, in particular, will seek to counter the impact of any tariffs by boosting domestic demand.
Apart from worries about a Trump administration’s impact on commodity markets, disappointment about the outcome of the highly anticipated meeting of the Standing Committee of China’s National People’s Congress added to weakness.
The country’s highest lawmaking body detailed a large bond program to alleviate the mountains of debt piled up at local governments, but no new fiscal measures were announced.
Larry Hu, chief China economist at Macquarie, told the South China Morning Post the interest payment relief for local governments represents less than 0.1% of the country’s GDP per year and while “it could reduce the local government debt risk, [it] doesn’t directly create demand like government subsidies for consumption.”
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