Base metals, including copper, saw a sharp rebound on Thursday after President Trump announced that he was pausing the implementation of reciprocal tariffs on dozens of countries. The pause will last 90 days, he said.
Despite the lull in the market fallout, a number of investors remain cautious since Trump took his trade war with China a notch higher by announcing that Chinese imports would now attract a 125% levy, up from the initial 104% previously announced. It now looks like a contest on who will cave in and blink first between these two largest economies on the globe.
Copper tumbled to $8,105 per ton on the London Metal Exchange (LME) at the start of the week. This was a sharp decline from the heights the metal had reached on March 26 when the price reached $10,164. This shows how sensitive the market is to factors like geopolitics.
Financial markets breathed a collective sigh of relief when the tariff kick-in date was extended and stocks and commodities rebounded.
Carsten Menke, an analyst working for Switzerland-based firm Julius Baer, described this market rally as simply a knee-jerk response to Trump’s latest announcement. According to him, the most critical determinant of the health of the market for commodities like copper is the relationship America has with China. No improvement between these countries has occurred, and Menke believes this is a critical determinant of the health of commodity markets.
He adds that there is bound to be a hangover in global markets since the vast majority of American importers had pre-bought the Chinese goods they need due to the expectation that tariffs would be imposed on the Asian country. Over the coming months, Menke adds, demand is likely to be depressed as the stockpiled goods make their way through the consumption cycle.
Copper contracts in Shanghai were trading at approximately $10,254, reflecting a 3.9% rally. This lifted the price of the metal from an 8-month low recorded midweek.
Other data from China doesn’t paint a rosy picture of the country’s economy at the moment. For example, the deflation of factory-gate prices worsened while consumer prices sank for another month after dropping in February. This shows that the Chinese economy isn’t picking up steam in the way that authorities there would wish.
All in all, the outlook for commodity markets isn’t as good as industry participants like Torr Metals Inc. (TSX.V: TMET) would like, but they remain hopeful. The coming weeks and months will reveal whether geopolitical tensions cool down and markets return to normal, or recession fears are strengthened as global economic growth grinds to a near-halt.
NOTE TO INVESTORS: The latest news and updates relating to Torr Metals Inc. (TSX.V: TMET) are available in the company’s newsroom at https://ibn.fm/TMET
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