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London metals are mixed amid investor caution over the US-China trade truce
Investor caution continued despite a temporary pause to the U.S. China trade dispute, which has weighed heavily on the global economic and financial markets. As of 0157 GMT, the benchmark copper price on London Metal Exchange (LME), was $9,598 per metric ton. U.S. president Donald Trump said Tuesday that he would be willing to deal directly with Chinese president Xi Jinping in order to finalize details of a U.S. China trade agreement. Washington announced that it would cut the "de minimis tariff" for low-value shipments coming from China down to 30%. This will further de-escalate a potential damaging trade war. The United States announced an agreement with China to reduce their reciprocal tariffs by a significant amount and suspend actions for 90 days. A trader stated that "the uncertainty surrounding trade tariffs continues, and while we await further updates it is important to remember that the truce period is only a transitional one, leaving the future unclear in three months." Other London metals include aluminium, which rose by 0.7% to 2,507 per ton. Zinc gained 0.5%, to $2719; lead fell 0.3%, to 1,983; and nickel, which climbed 0.1% to $15,755. Tin lost 0.2% to $32,660. The Shanghai Futures Exchange's (SHFE) most traded copper contract rose by nearly 1%, to 78.610 yuan per ton ($10,898.08), boosted by falling inventories and strong domestic demand. Copper inventories The Shanghai Futures Exchange tracked 80,705 tonnes in its warehouses. A slower decline rate helped ease supply concerns. SHFE aluminium rose 1.1%, to 20,215 Chinese yuan per ton. Zinc increased 1.3%, to 22,630 Chinese yuan. Lead fell 0.1%, to 16,935 Yuan. Nickel price rose 0.6%, to 124970 Yuan. Tin advanced 0.9%, to 265,650 Yuan. $1 = 7.2132 Chinese Yuan
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Gold falls as demand for safe-havens weakens due to easing US-China trade tensions
The gold price fell on Wednesday, as the de-escalation of U.S. China trade tensions dampened safe-haven demand. Meanwhile, markets waited for another set inflation data in order to gauge the Federal Reserve’s policy direction. As of 0231 GMT, spot gold was down 0.4% at $3,234.32. U.S. Gold Futures fell 0.3% to $3237.00. Kyle Rodda, Capital.com financial analyst and expert on the gold market, said that positive developments in US trade policies are reducing the appeal of the metal in the short term. "I believe that if there is continued progress made in the trade negotiations and agreements between the US, and its trading partners then gold could pull further back. "$3,200 is an important level of support." According to a White House Executive Order and industry experts the U.S. is reducing the "de minimis tariff" for low-value shipments coming from China by 30%. This will further de-escalate a potentially damaging war of trade between the two world's largest economies. Donald Trump, the U.S. president, said on Monday that he doesn't see tariffs for Chinese imports going back to 145% following the 90-day break. He also added that Washington and Beijing would reach a deal. The United States Department of Labour reported that the consumer price index rose 0.2% in April. However, economists polled expected a 0.3% increase following a 0.1% drop in March. The Fed's rate path will be revealed by the Producer Price Index, which is due to be released on Thursday. Market participants expect 53 basis points in rate reductions this year starting in September. Gold is traditionally seen as a hedge to inflation. It also thrives in an environment of low interest rates. Trump said that prices of gas, groceries, and "practically anything else" have been falling. Silver spot fell 0.8%, to $32.63, platinum remained at $987.85 an ounce and palladium dropped 0.7% to $950.18. (Reporting and editing by Sumana Mukherjee and Janane Venkatraman in Bengaluru)
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Iron ore reaches a new high of over 5 weeks on Sino-US trade optimism
The price of iron ore futures rose to its highest level in over five weeks on March 13, driven by the United States' and China's decision to reduce tariffs after a trade deal, which boosted hopes for a long-lasting resolution to the trade conflict. As of 0215 GMT, the most traded September iron ore contract at China's Dalian Commodity Exchange was up 1.81% to 732.5 Yuan ($101.51) per metric tonne. Earlier in the session, the contract reached its highest level since 7 April at 736.5 Yuan per ton. As of 0205 GMT, the benchmark June iron ore price on Singapore Exchange was $1.6% higher at $100.1, compared to its previous level. The contract reached its highest level in over a month at $101.45. China announced on Tuesday it would lower its tariffs against U.S. products to 10% for the first 90 days. This will begin at 12:01 PM (0401 GMT) Wednesday. The U.S. is reducing the "de minimis tariff" for low-value Chinese shipments to as low 30%. In an interview broadcast Tuesday, U.S. president Donald Trump stated that he would be willing to deal directly with Chinese President Xi Jinping regarding the final details of a U.S. China trade agreement. Shougang Hierro Peru, a Chinese iron ore miner, has also suspended its operations following a collapse of part of the dispatch infrastructure at its shipping ports. Repairs are expected to take four to five months. Analysts and traders said that the Chinese steelmaker would have to purchase more iron ore cargoes on the spot market in order to maintain production. Coking coal and coke, which are both steelmaking ingredients, also saw gains, rising by 0.97% each. The benchmark steel prices on the Shanghai Futures Exchange have strengthened. Rebar gained 0.65%, while hot-rolled coil and wire rod both added 0.74%.
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Dollar struggles as investors consider tariff truce
The dollar wobbled on Wednesday as the relatively benign U.S. Inflation data fueled prospects for rate cuts from the Federal Reserve this year, even though investors were still trying to gauge if the worst trade conflict was over. Financial markets were nervous as Donald Trump's trade war with China appeared to be on hold, following a truce between the two countries. Tony Sycamore, IG analyst, said: "I am a bit cautious about chasing this rally at this point." We'll have to wait and see what happens in terms of headlines, the framework for further tariff negotiations with foreign countries, but at this stage the worst-case scenarios has already been priced out. MSCI's broadest Asia-Pacific index outside Japan rose 0.9% early in the day after U.S. shares climbed into positive territory for this year, wiping out losses caused by Trump's chaotic tariff rollout. Hong Kong's Hang Seng index climbed in early trading, lifted by tech shares after Chinese ecommerce retailer JD.com reported strong results. This week, investors will focus on the earnings of Tencent and Alibaba. Equity futures showed a retreat in the European and U.S. market. Investors who were worried about inflationary impacts of U.S. Tariff Policies, which severely undermined expectations of Fed rate reductions in the near future, also found some relief from data overnight that showed softer than expected U.S. Consumer inflation. Although traders expect the inflation rate to rise as tariffs increase import costs, there is still uncertainty about the future as Washington continues to negotiate with its trading partners. The global mood improved after the U.S.-Britain trade agreement last week. It was further boosted when U.S.-China announced on Monday that they would suspend their trade war and reduce reciprocal duties for 90 days while they negotiate an arrangement more permanent. Trump has also touted potential deals with India, Japan and South Korea. The Fed warned of increasing economic uncertainty and indicated it was prepared to wait a while to evaluate the impact of U.S. Tariffs before cutting interest rates. The U.S. Dollar, which has been hammered recently due to economic and political uncertainty, fell 0.2% against yen and remained unchanged at $1.1866 against the euro. The dollar index was barely changed following a 0.8% decline in the previous session. The Nikkei 225 index of Japan fell 0.7% on Wednesday, reversing a 1.4% gain. Retail sales for April, due Thursday, will be the next big indicator of the health of the U.S. economy. On the same day, Russia and Ukraine will hold talks in Istanbul in hopes of reaching a ceasefire after three years in Europe's deadliest conflict since World War Two. Bank of America’s Global Fund Manager Survey (FMS) revealed on Tuesday that global asset managers had their largest underweight position against the dollar in nearly 19 years as Trump’s trade policy reduced investor appetite for U.S. investments. The yield on the benchmark 10-year Treasury note fell 2 basis points to 4.4768. U.S. crude fell 0.3% to $63.48 per barrel while spot gold dropped slightly at $3244.79 an ounce.
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Early 2030s will see the global cobalt market swing from surplus to deficit.
The Cobalt Institute published a study on Wednesday that showed demand for cobalt would rise faster than the supply. This will allow the market to decrease the surplus of 2024 in the coming years, and then swing to a deficiency in the early 30s. The future of cobalt in the short-term depends on the decision that the Democratic Republic of Congo, the world's largest producer of the mineral, which is used to manufacture the lithium-ion battery packs that power electric cars, makes after the four-month ban on exports, which was imposed late February. The ban was imposed by the central African nation to combat the glut on the market, which had seen cobalt prices fall to a 9-year low end-February. Prices have risen 60% since then to $16 per lb. ,. Indonesia will increase its production faster than the DRC, despite the uncertainty surrounding the DRC export ban. The DRC is losing market share from last year, when it accounted for 76% of the global primary cobalt supplies. Benchmark Minerals Intelligence prepared a report for the Cobalt Institute that showed the DRC's market share would reach 65% by 2030. Indonesian share is projected to rise from 12% to 22% in 2024. The EV market is expected to drive the demand for cobalt to 400,000 metric tonnes by early 2030s, with a 7% CAGR. Cobalt consumption in 2018 reached 222,000 tonnes. In 2030, cobalt consumption will be 57% higher than in 2024, with growth slower for other sectors such as laptops, mobile phones, superalloys and other industrial segments. The report stated that in 2024 the cobalt markets would be in surplus by 36,000 tons or 15%, up from 2023's 25,000 tons. (Reporting and editing by David Evans; Polina Devitt)
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Volkswagen suppliers are on the list of RPT-Beijing's first export permits for rare earth magnets
Sources in the industry said that China had granted export permits to four rare earth magnet manufacturers, including Volkswagen, the German automaker. This was the first time since Beijing restricted shipments a month ago. It is a sign the flow of critical materials will not be stopped. Three sources confirmed that Baotou Tianhe Magnetics - which produces magnets for electric and hybrid cars - received a license from Volkswagen at the end of April. Three sources said that Baotou Tianhe Magnetics, which makes magnets used in electric and hybrid car motors, received a licence for Volkswagen at the end of April. Volkswagen responded to questions by saying that it was in constant contact with its suppliers. It had also received information that the Chinese government has granted export licenses to a small number of magnet suppliers. Two sources confirmed that Zhongke Sanhuan had received at least one license. Baotou INST Magnetic, Earth-Panda Advanced Magnetic Material and Baotou INST Magnetic were all granted at least one license. Sources declined to name themselves due to the sensitive nature of the issue. Requests for comment from the four magnet manufacturers and China's Commerce Ministry were not immediately responded to. Beijing has not yet confirmed whether all four companies have received export licenses. According to one source, export permits are only granted for suppliers who have customers in Europe or Vietnam. The permits were issued prior to the Monday truce in the trade war with Washington, according to industry sources. This is likely to make approvals easier for U.S. clients. Beijing issued the permits within a month of its earlier restrictions on seven rare-earth elements and related materials in response to U.S. president Donald Trump's tariffs. The industry had expected a lengthy wait. Sources said that the permits were the very first ones issued since Beijing implemented its restrictions. China is the dominant supplier of rare earths used in clean energy, defense, and auto manufacturing. Companies have very few alternative suppliers. Volkswagen's involvement and lobbying by other large Western users demonstrate this dependence. Elon Musk revealed last month that Tesla was in discussions with Beijing about licenses for its Optimus robotics. Reporting by Beijing Newsroom and Christoph Steitz, Frankfurt; Editing done by Lewis Jackson, Tony Munroe and Kirby Donovan
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Trump praises Saudi Crown Prince, signals renewed alliance
Four years ago, Saudi crown prince Mohammed bin Salman was unable to meet with the then-President Joe Biden. Biden said that he wanted the Gulf nation to be a pariah because its leader had allegedly ordered the killing of a Washington journalist. Donald Trump praised Saudi Arabia's de-facto ruler in a gushing manner on Tuesday. He called him "an incredible guy" and "a great guy", and did not mention the human rights situation within the country. "I like him very much." "I like him too much," Trump exclaimed as the cameras flashed, and the crowd applauded. The summit was held in Riyadh to kick off his first major overseas visit of his second term. The affectionate display for a leader who has a controversial history was reminiscent of Trump's first tenure, when he formed an alliance with bin Salman which grew stronger through mutual flattery and deals. The relationship is still based on shared interests. Trump wants to achieve major economic gains and revive the U.S. presence in the region. Bin Salman, meanwhile, seeks advanced technology, military assistance, and a powerful partner in his efforts to modernize Saudi Arabia, and assert regional leadership. Trump announced at the summit a $142 billion deal on defense and a $600 billion Saudi investment package that included artificial intelligence, infrastructure, and energy. Trump's relationship with the Crown Prince has sparked criticism by U.S. legislators, human rights organizations and foreign policy analysts. They viewed it as a prioritization of economic interests above human rights. Bin Salman denied any involvement in the murder of journalist Jamal Khashoggi and cited reforms like expanding women's right as proof that progress had been made. However, analysts say these reforms have been undermined by continuing crackdowns against dissent and freedoms. Trump's relationship with bin Salman has a much warmer tone than that of his predecessor in the White House. Biden's relationship took a more friendly turn with bin Salman, too. From initial criticism to a pragmatic cordiality. BIDEN PICKS RESET In 2019, the Democratic President promised to make Saudi Arabia "a pariah" on the international stage because of Khashoggi's murder and its human rights record. Geopolitical realities, such as the soaring oil prices in 2022 due in part to Russia's invasion in Ukraine, have highlighted the need for Washington and Riyadh to work together. Biden decided it was time for a new strategic relationship and visited the crown Prince in July 2022. Some criticized the gesture as being too friendly, given concerns about human rights. White House officials insisted that it was to reduce Biden's chances of contracting the COVID-19. The relationship improved rapidly as his administration sought to broker a deal that would normalize Saudi-Israeli ties in exchange for an expanded U.S. Defense Agreement. The effort was halted by the attack on Israel by Hamas in 2023 and Israel's subsequent conflict with Gaza. During Trump’s visit to the United States on Tuesday, the Crown Prince personally welcomed the U.S. President, escorting up an escalator, and then driving him in golf carts ahead of a State Dinner. Trump, in a move that underlined their close relationship, pledged to lift U.S. Sanctions on Syria. He said that bin Salman had requested this dramatic action. Trump said: "Oh, I do for him." The crown prince then placed his hands on his heart, and a standing applause followed. (Reporting from Gram Slattery and Nandita in Riyadh, with additional reporting by Andrea Shalal; Writing by Nandita, and Editing by Colleen, Jenkins, and Cynthia Osterman.)
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Mexico expects early USMCA review to give clarity to investors and consumers
Mexico's Economy Minister said that the country hopes to begin a trilateral review with the U.S., Canada and other countries in the second half this year. This will provide more clarity for consumers and investors. On the sidelines of an event organized by the Ministry of Finance with local firms, Economy Minister Marcelo Ebrard said to journalists: "We expect that we will start discussions in second half of this year." He added, "We hope that they will happen as quickly as possible and we can come to an agreement as soon as." Next year, the USMCA will be reviewed. The US President Donald Trump wants the agreement renegotiated in advance. Ebrard stated that the early review of trade policies could make it "easier" and "clearer" for consumers and investors to understand. Ebrard announced on Monday that he expects the review to start earlier than scheduled. He said, "That would be convenient for us." It would be clearer to us as to how the treaty will function in comparison to other parts around the world. The USMCA is still in force despite the ongoing U.S. Tariffs. It currently impacts the shipments of steel and finished automobiles from Mexico to the United States. Ebrard said that Mexico was working on negotiating more favorable terms to export steel, aluminum and automobiles to the United States.
Shanghai frenzy fuels alumina's record-breaking rally: Andy Home
Alumina costs have actually skyrocketed to record highs this week, compressing margins at the world's. aluminium smelters which transform the intermediate product into. metal.
The London Metal Exchange (LME) cash rate, indexed. to Platts benchmark Australian alumina assessment, closed. Wednesday at $633.35 per metric heap, lifting the ratio to the. aluminium cost to almost 25%.
The alumina-aluminium ratio was just 15% at the start of. 2024, when alumina was priced at $350 per heap.
A series of supply interruptions have driven the alumina price. higher this year. The trigger for the current cost jump was news. of export problems in Guinea, the major import source of bauxite. for China's alumina refineries.
The physical alumina market is undoubtedly tight however the. explosive nature of the price action also indicates a speculative. craze on the Shanghai Futures Exchange (ShFE).
SHANGHAI BOOM
Nearly 25 million heaps were negotiated on the ShFE alumina. agreement on Wednesday, a record daily high and comparable to. nearly a fifth of worldwide annual production.
Open interest has likewise skyrocketed to life-of-contract highs as. financiers have actually purchased into a gradually increasing market.
The exchange changed both trading limitations and margins on. Thursday, imposing a percentage point premium on speculative. positions relative to industrial hedge positions.
This is standard operating procedure for China's exchanges. in the face of speculative surges such as that currently washing. into the Shanghai alumina market.
This sort of futures price volatility is a new phenomenon. for the alumina market.
Both the LME and its U.S. peer CME Group deal alumina. contracts but neither is liquid. The explosive growth in the. Shanghai contract, by contrast, has changed the dynamic in between. paper and physical markets because trading began in June last. year.
This is the second bout of turbulence on the Shanghai market. after a huge price spike in January, likewise due to concerns. about Guinean bauxite supply.
ALL EYES ON GUINEA
The cost sensitivity to occasions in Guinea highlights how. dependent China's alumina refineries have become on West African. bauxite.
China's bauxite mining sector has been struck by multiple waves. of environmental examinations, limiting domestic supply and. motivating more alumina refineries to look overseas for their. basic material.
Imports of Indonesian bauxite stopped early 2023 after the. Indonesian government prohibited exports in a drive to force its. miners downstream into refining and smelting.
Guinea has quickly emerged as China's primary bauxite provider. Imports doubled in between 2000 and 2023 to nearly 100 million loads. and were up by another 13% in the first 8 months of this. year.
The January alumina panic was down to an explosion at an oil. terminal in the Guinean port of Conakry. This time around it's. news that a regional subsidiary of Emirates Global Aluminium has. had its bauxite exports suspended by customs.
Although extremely overstated, the cost response in Shanghai. is sensible, given the absence of alternative bauxite supply and. tighter conditions in the alumina market itself.
SUPPLY HITS
Alumina supply has taken multiple hits this year.
U.S. manufacturer Alcoa revealed in January the. permanent closure of its Kwinana refinery in Australia. The. ramp-down was set up to be finished by the third quarter.
In May Rio Tinto stated force majeure on. shipments from its refineries in Queensland due to restricted. gas capacity levels.
Century Aluminum's operations in Jamaica were. briefly disrupted by Cyclone Beryl in September and South32. has flagged issues about its Australian operations. due to conditions on its operating licence required by. ecological regulators.
Meanwhile, Chinese demand for alumina has actually been growing. strongly as the country's smelters have gained from enhanced. power supply, particularly in the hydro-rich province of Yunnan.
National aluminium output increased by 4.4% year-on-year in the. initially eight months of 2024 with annualised run-rates increasing. by almost 1.5 million tons because December.
That said, China at a nationwide level doesn't appear to be. physically short of alumina considering that it continues to export. significant quantities to Russia.
Indeed, exports to Russia rose by 41% year-on-year to 1.0. million loads in January-April, turning China from net importer. to net exporter of the intermediate item.
FUTURE( S) DISRUPTION
However physical availability is not the same as exchange. accessibility.
ShFE alumina stocks have come by over half because. June to 103,416 loads. The result is time-spread tightness with. the premium for cash relative to forward agreements flaring larger. today.
Short-position holders' ability to provide physical product. will depend on just how much alumina is located at ShFE's four. delivery points in the provinces of Shandong, Henan, Gansu and. Xinjiang.
Much also hangs on how major the danger of interruption to. Guinean bauxite deliveries is. The January scare rapidly went away. and there's no sign the current incident is the precursor. of a national change of policy around exports.
What has actually changed, however, is the response time to such. events.
Before the arrival of the Shanghai futures contract, area. alumina was priced by physical freight deals, which can be. scarce in a market controlled by yearly supply. contracts.
Now a heading from Guinea can move the futures rate in. seconds, producing a detach in between paper and physical. markets.
This added volatility is going to make the formerly. relaxing alumina market a much more unstable place.
It's also going to make smelter costs a lot more. unforeseeable with a potential knock-on impact on the cost of. aluminium itself.
(source: Reuters)