China announced it would stoke its infrastructure spending via special purpose bonds issued by local governments. This new avenue of financing was created to help combat against the economic repercussions felt within domestic China resulting from the trade war with the U.S. Although metal prices reacted favorably to Beijing’s announcements, the euphoria quickly died out. China is the world’s largest commodities consumer, including industrial metals and copper. The country accounts for nearly 50% of the world’s copper demand.
Although industrial metal prices rallied at the beginning of year, they have since fallen from their peak in mid-April. Late April was also the beginning of rising trade tensions between US and China, which ended in a no deal by mid-May. Being the largest commodities consumer in the world, as China continues to get hit from trade war tariffs, it’s certain that industrial metal prices continue to fall.
Speculators and hedge funds who hold a negative outlook on the metals market continue to profit from their short bets against falling prices. Without any trade war truce between the U.S. and China, expect metal prices to seek new lows for the year.
On the oil front, geopolitics have been playing a heavy hand in crude prices. Although oil prices saw an initial jump after the U.S. accused Iran of attacking oil tankers in the Persian Gulf, causing fears of a regional Middle East conflict, those gains were quickly erased. Traders continue to analyze data showing softening Chinese demand as a result of its prolonged trade war with U.S.
Coincidentally, U.S. inventory of oil has touched historical highs as fracking continue to ramp up within domestic U.S.
