The election victory of Donald Trump and the Republican Party, along with its impact on commodity markets, has led to significant volatility in the metals market, causing investors in major copper producers to become distinctly bearish.
Copper for December delivery faced renewed pressure on Monday (November 11), dropping about 1.7% in afternoon trading on the Chicago Mercantile Exchange to below $4.23 per pound (approximately $9,320 per ton). Since Trump’s victory, copper prices have fallen nearly 6%.
Copper prices had surged in late September due to optimism over China’s economic stimulus measures, but they have since tumbled nearly 12%, closing at a two-month low on Monday.
BHP‘s shares also took another significant hit on Monday, down 6% since the U.S. elections, marking a year-to-date decline of over 21% for the top producer. For Rio Tinto (RIO), the declines were 3% and 16%, respectively. Since the close on November 5, Glencore (GLNCY) and Southern Copper (SCCO) have dropped 6% and 8% in New York, respectively, while Freeport-McMoRan (FCX)’s market value fell by 5%. Teck Resources (TECK) experienced a milder decline of just over 3%. The sell-off has been particularly severe for stocks of lower-ranking producers.
Marcus Garvey, the head of commodity strategy at Macquarie in Singapore, cites comments from the bank’s economists in a new trading report that imposing a 60% tariff on all goods imported from China, combined with extensive tariffs aimed at restructuring trade, could result in an 8% reduction in Chinese exports. China consumes more than half of the world’s copper supply.
“The slowdown in global economic growth is clearly unfavorable for the overall price performance of commodities, while the dollar stands to benefit from this situation. In fact, although commodities are typically viewed as a hedge against inflation, in this case, inflation is neither driven by strong demand growth nor by supply shocks in commodities, making it difficult for them to maintain this reputation.”
In addition to concerns about the Trump administration’s impact on the commodities market, the highly anticipated Standing Committee meeting of the National People’s Congress in China did not announce any new fiscal measures, which further weakened gold prices.
