This week, most exchange-traded metals came down to Earth as the Federal Reserve hinted it may finally increase interest rates. The hardest hit was copper, which hit a two-month London Metal Exchange low. Weaker Chinese imports over the past few months and the bearish calls of some major banks have exacerbated copper’s recent price fall.
When construction is strong in China, copper imports surge. But with them falling? It doesn’t look like demand in the world’s largest consumer is keeping up. Copper is just one of many metals that would be affected by interest rate increases and more hawkish behavior from the Fed, in general, but unlike other non-ferrous metals whose prices have increased on the LME this year — such as zinc and tin — copper has not shown strong demand and generally falling supply. Copper never was fundamentally strong, even when its price jumped in Q2.
Trump Trumpets Trade
Politics met metals this week as Republican Presidential Nominee Donald Trump became the first candidate for president to promise to label China a currency manipulator and take action at the World Trade Organization accordingly since China ascended to the WTO. He also promised to instruct the office of the U.S. Trade Representative to bring more trade cases against China. You’d think he’d be nicer to the country that used to make his ties.
Let’s Exchange, No Spoofs!
The London Metal Exchange and CME Group made headlines this week as the former cut fees in half this month as an apology for moving its live “ring” trading (where traders make deals using hand gestures on big red couches) to a backup location after structural problems were discovered at its brand new London office. As for CME Group, it cracked down on a rogue trader, suspending him for at least 60 days, for “spoofing.” Spoofing is the practice of setting up electronic trades to create demand only to pull out of them at the last minute.
India Hates Steel Dumping, Too
India joined the U.S. and E.U. this week in placing sanctions on cheap imports of hot-rolled and cold-rolled flat steel. Although six countries saw their imports to the world’s largest democracy tariffed, China was, again, the main dumping culprit.
Aluminum Association Still Wants a Deal
Speaking of China, not only does the Aluminum Association — North America’s largest trade association of primary smelters — still want a bilateral trade deal with China to set up rules for imports from the People’s Republic, but it signaled this week that it would pursue tariffs similar to those steel has won against Chinese importers if it can’t get the deal it wants for its producers. The AA may even ask the International Trade Commission to reclassify some imports of “semi-finished” product to make them subject to existing taxes.