Copper, Iron Ore Fall on Fears of Trade War
Copper, aluminum, and iron ore prices declined sharply after President Donald Trump imposed tariffs on China, Canada, and Mexico, raising concerns over a potential trade war.
Copper, a key industrial metal, fell by 1.5% on the London Metal Exchange (LME) before partially recovering. Steelmaking raw material iron ore dropped by 3.5% in Singapore, while Chinese markets remained closed for the Lunar New Year holiday.
The tariffs, which will take effect from Tuesday, have contributed to a stronger US dollar, making metals more expensive for foreign buyers.
China, the largest consumer of most metals, has threatened countermeasures and plans to file a complaint with the World Trade Organization. A global trade war could spur inflation, keep interest rates high, and dampen global growth and metals demand.
China's manufacturing activity unexpectedly declined for a second consecutive month in January, highlighting the need for Beijing to boost economic stimulus to offset the impact of the tariffs.
Analysts at ANZ Group Holdings note that while the energy transition and European economic recovery support metals demand, the proposed tariffs may curb growth as business confidence remains subdued.
Copper fell 1.2% to $8,942.50 on the LME as of 7:24 a.m. in London, following a 2.5% decline last week. Aluminum and zinc also declined, while iron ore lost 1.4% in Singapore.
The reopening of Chinese domestic markets on Wednesday will shed further light on the impact of the tariffs on commodity prices. However, analysts believe the tariffs may benefit US steel producers by supporting domestic prices due to higher import costs.