Base metal prices in China witnessed a significant decline on Monday, largely due to escalating tensions from the ongoing trade war and growing concerns about a potential recession. The most actively traded copper contract on the Shanghai Futures Exchange (SHFE) fell by 6.0%, reaching 74,440 yuan per metric ton, a level not seen since early January. Concerns over the trade war have intensified following China’s announcement of a 34% tariff on all U.S. goods effective April 10, in retaliation to the U.S. imposing similar tariffs on a vast array of Chinese products.
A metals trader shared that such retaliatory measures raise fears about the implications for global economic growth. In contrast, the London Metal Exchange (LME) saw most metal prices recover as the Asian market opened, primarily due to increased activity from arbitrage traders. These traders exploit discrepancies between prices on the SHFE and LME, buying metals where they are cheaper and selling them where prices are higher.
This activity enhances market liquidity, ultimately driving up LME metal prices. Particularly, SHFE aluminium dropped 2.9% to 19,835 yuan per ton, while zinc and lead fell by 1.6% and 1.7%, respectively. Nickel experienced a 5.5% decline, and tin saw a decrease of 6.0%.
Conversely, on the LME, aluminium prices rose by 1.6% to $2,416.5 per ton, lead increased by 0.5%, and zinc showed gains of 1.6%. However, tin and nickel prices fell slightly. This dynamic between the SHFE and LME demonstrates the impact of trade relations on global metal prices, showcasing the complexities of the current market environment.