I have more experience in the copper market than anything else. That's my preface. I've also been all around the world. One of the most interesting undermine tactics I have seen used against the US is literally its trade deficits. I will drill down this one and I apologize for the length. Everything that follows is my assessment on demand and how I think it will command price. Given that the US is at deficit we should really only talk about demand to be pragmatic. The US cannot provide enough steel, copper or aluminum in the 2025 and future scrap recovery streams to satiate even domestic demand. Africa for example completely obliterates us in ship dismantling, what they and india do in a day takes the EU and US a week to produce. Likewise, China is an aggregate importer, as they have their OWN demand to feed their industry.
Copper for 2025, I think we will see a lower than expected export demand to the EU and China, If we were worried about volume trade, that might depress prices when mines take a break in April. Where copper is now, by May it might dip to 4.00. The reaction right now is the expectation the war is going to end. Copper is used heavily in armaments and munitions manufacturing. Nickel for the same reason is showing volatility. (And Uranium). Things I believe about demand. We are going to push a ton of money into Ukraine, Donbas, railroads, roads, bridges...hell the anticipation has caused steel mills that primarily produce rebar and structural product to go into round the clock production. EVERYBODY is chomping at the bit to get going on rebuilding and mining, neither of which can happen until power transmission and transportation infrastructure is rebuilt. THIS will drive copper, an estimated five million tons will be used just to give western ukraine independence from Russia power infrastructure. Now IF this demand on various projects which will include the EU having to make copper and steel purchases itself this fiscal year to ALSO gain some modicum of independence from eastern power sources... your looking at a 25% elevated demand from what the smartest men in the room are saying about futures. I think May will be down, and that's going to conincide with lack of domestic contracts, the Canadian and American economic shrinkage will continue, the infrastructure bill was a bust, theyve spent an average of 2 billion dollars per charge point which I thought was going to drive a consistently high copper price all year last year and that was not the case, entrenched warfare fed copper consumption. By July 2025, 4.65 again. By December we could be consistently over 5.00 per lb. I do expect China to buy above market just for their own stockpiling efforts. After all wars are won or lost on who has the most oil, copper and steel.
Aluminum: This one is problematic. Its tariff dependent for sure as Canada is a massive bauxite producer...but so is Russia. If a trade deal gets done, that will pull a 150 billion dollar industry's legs right out from under Canada. I hate it for them, but if you ask me if its worth doing more substansive customs inspecting, helping the US fend off Fentanyl, fake pharmaceuticals and enforce trade tariffs with China I would say yes in a heartbeat. Canada cannot actually subsist with a product tariff on its car production. Oh sure it will suck for everybody everywhere, but Canada will be hurt actually immediately, since they pour aluminum and steel industries into their chief industrial export. How will this affect price? Well I don't like that May contracts have the lowest tonnage settlements since the 90s. I am expecting some of that to be the end of world conflicts but also tariffs. Not every domestic buy IS a recorded contract. For example Sadoff Rudoy direct sells aluminum the day they fill the cars because the plant that does the recovery is just down the line. I think Domestic price is probably going to remain where it is now, EU and Canadian prices will fall 20-30% and so will China, China is probably going to be on the losing end of every sale they make this year if they even have the chance to make big market sales. I am getting around a dollar for virgin 6061 in truck quantity, and that lines up with market around 2650 gross ton as of this writing. Aluminum is also heavily dependent on the transport market and that looks like cars and trucks wont recover in sales for 3-5 years. That market is UGLY. (I would expect automakers to start sweating and making their positions known this summer, which could depress aluminum).
Steel: This is the big unknown. I do think were in the middle of economic shrinkage across all western nations. It's become apparent the numbers have been fudged all through covid and after. I don't however believe productivity will be down. You have alot of shrink that will come directly from a reset of real estate pricing, if not the majority...but production for all industrial components will increase. I think we we're going to see a market that stays relatively flat, even if the war ends, rebar and structural steel will really keep demand up globally. I even expect China to give up its reserves to get in on the action. Expect several large contract dumps that might make prices go down 20-40 a ton for short three week periods all thru the summer. Lets not forget how China was able to pull the big switch before covid. They would dump huge contracts, depress domestic price down into the 70s-100s and then distribute buys at those prices that quadruple the return tonnage. I don't think they have the ability to do that again, thus expect blips and plan your sales around them.
The TL;DR Spring will be volatile, if Ukraine war ends and Gaza conflict closes up that will cause commodity turmoil BUT we still need to replenish munition reserves and then the rebuild phase will come. By summertime the prices should elevate and stay there all the way to next winter.
Gold is a whole other consideration...I don't care to get into right now.
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