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The physical steel and aluminium markets are reeling after the United States said it intends to introduce tariffs on imports of 25% and 10% respectively.
The LME three-month copper price has dropped more than $200 per tonne from its February highs to $6,915 per tonne on Thursday March 8 in part because of the growing threat of stronger restrictions on trade and in turn on growth.
Protectionism is a growing concern for copper market participants, panelists at the conference in Madrid said.
“Protectionism is back and it’s back for a long period… we need to get accustomed to that idea that tariffs are something we have to start living with again,” Panos Lolos, head of commercial at Greek copper pipe maker Halcor, said.
“If there is a tariff for steel and aluminium, it will arrive soon on copper, but we are already suffering for the past two years,” Marco Calamia of Italian semi products maker KME Group said.
The US is a net exporter of copper while it relies heavily on imports for commodity-grade aluminium and steel. But other countries have already have protective measures in place.
“It’s a myth that protectionism is back because of the new US administration. Even within the EU we have protectionism – Turkey and China are also using this,” Lolos said.
As well, Canada initiated in October an anti-dumping investigation into copper pipe imports from Vietnam. Turkey is conducting a similar investigation into imports of copper pipe from Greece.
“It’s maybe not official but we have a lot difficulty to sell our copper products in the US from Europe – there is not a tariff but there are anti-dumping measures,” Calamia said.
Global growth worries pose risk to copper price The threat posed by escalating trade sanctions and tariffs to burgeoning global growth puts copper prices at risk of falling further.
“We’re seeing a lot of concern about how these trade escalations play out – it’s what is been driving the market for the last two weeks,” ING Bank Commodity Strategist Oliver Nugent said.
Global economic growth has been a leading driver of copper prices up to $7,200 per tonne in December and February, analysts – including Metal Bulletin’s Boris Mikanikrezai – said.
“[Contraction] would almost certainly impact on the copper price as well, based on the correlation between growth and prices,” Bank of America Merrill Lynch strategist Michael Widmer said.
“[But] I wouldn’t take announced measures at face value – it’s an opening gambit. Implementation may be different,” he pointed out.