LONDON: Aluminium and copper prices retreated on Tuesday as investors worried that new US tariffs and a potential global trade war will curb economic growth and metals demand.
Three-month aluminium on the London Metal Exchange (LME) shed 0.7% to $2,640 a metric ton in official open-outcry trading, while copper dropped 1% to $9,354.
US President Donald Trump substantially raised tariffs on steel and aluminium imports on Monday to a flat 25% “without exceptions or exemptions”, which risks sparking a multi-front trade war.
“It’s potentially quite damaging for the US economy, because if you put on tariffs on everybody, on aluminium, steel and semis as well, you just damage downstream manufacturing,” said Dan Smith, head of research at Amalgamated Metal Trading.
Smith was referring to semi-fabricated aluminium because Trump’s action also extends the tariffs to downstream products that use foreign-made metal. “Then phase two is the retaliation from other countries. US imports are enormous but their exports have been growing a lot as well, so they’re still going to get hit by all this.”
The US is highly dependent on imported aluminium, mostly from Canada. Prices of primary aluminium in the US are based on the LME benchmark plus the Midwest premium, which was last at 35 cents a lb, the highest since May 2022, jumping by 25% since Friday and having surged by 60% since Trump was elected.
“We expect any tariff will lead to higher prices for US manufacturers. This would most likely be in the form of higher US Midwest premiums rather than a sustained uplift in the LME price,” ANZ Research said. The premium of US Comex copper futures over the LME contract rocketed to a record high on Monday on fears that copper would also be slapped with US tariffs.
The premium eased to $725 a ton from $930 at Monday’s close, but it has still doubled since the end of January. Among other metals, LME zinc dropped 1.3% to $2,811, nickel lost 0.9% to $15,380, lead slipped 0.9% to $1,982 and tin ceded 0.4% to $31,025.
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