This week, the copper market experienced significant fluctuations, mainly influenced by the U.S. presidential election and the economic policy developments released by China. Unlike the substantial increase in copper prices after Trump's victory in 2016, this time copper prices did not exhibit similar drastic fluctuations. Before the election, fund managers remained cautious with fairly moderate long positions on copper. Around the election, the London Metal Exchange copper prices fell sharply by 4.1% on Wednesday, but quickly rebounded on Thursday, almost regaining the lost ground.
Market analysts suggest that potential tariff threats by the U.S. on Chinese goods might prompt China to intensify economic stimulus efforts. Although China announced a $1.4 trillion package aimed at alleviating local government debt pressure, this move did not meet market expectations, leading to a sell-off in copper prices. By Friday, copper prices closed at $9,443.50 per metric ton, marking a 1.3% weekly decline.
This U.S. election has triggered market expectations regarding the future direction of trade policies, particularly the potential tariff policies that might impact the metal trade flows between China and the U.S. Trump's proposal of a 60% tariff on Chinese goods has exacerbated concerns about copper demand. Although the Biden administration had previously raised tariffs on Chinese aluminum and steel products, prompting similar measures from Canada and Mexico, the copper market is primarily concerned with the long-term impact on China’s economy since its current capacity to endure trade frictions may not be as strong as eight years ago.
After the election results were announced, the market shifted focus to China, anticipating policy indications from Beijing. However, China mainly released debt management measures that failed to provide significant short-term growth prospects for the copper market. As the world's largest metal consumer, China's economic policies have a profound impact on copper prices. Following the election, investors reoriented their attention towards China’s actions, especially any economic stimulus measures that might affect metal demand. The future trajectory of copper prices will continue to be deeply influenced by the policies of both the U.S. and China.
