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Casper Burgering, Senior Sector Economist at ABN AMRO, suggests that the uncertainty caused by US economic policy is creating a lot of stress in base metals markets.

Key Quotes

“As a result of the trade war between the US and China, many investors in metal markets are also worried about the resilience of the Chinese economy. The question is whether the current turmoil will come at the expense of Chinese economic growth in the long term. A negative scenario is the most obvious outcome of a further escalation. Finally, the strengthening of the US dollar is also having a strong negative impact on metals prices.”

“The recently announced new round of US import tariffs against China had relatively little impact on base metal prices. Indeed, prices even increased and that indicates that this new round has already been priced in.”

“For the time being, the tit-for-tat measures will continue to influence base metal prices in the short term, which will increase volatility. But because of the more positive fundamental trends in the longer term, we expect stronger prices going forward.”

“Conditions on the supply side are expected to worsen in most markets in the coming months. Less supply at the current level of demand will bring deficits in most base metal markets. Combined with further decreasing inventories in LME warehouses, prices will increase. In addition, the long-term demand projections for base metal also paint a favourable picture. Demand growth will be fuelled by further growth in the electric car sector and planned global infrastructural investments.”