On Friday, copper prices tumbled due to mounting skepticism regarding Beijing’s newest fiscal stimulus’s ability to spur economic recovery in China.
US copper futures for December delivery plunged by 2.83% to $4.31 per pound on November 08, highlighting the metal commodity’s volatility. Moreover, market analysts anticipate the downward trend to persist, with a 0.45% drop to $4.29 in the upcoming market session.
The Chinese Communist Party (CCP) announced a $1.40 trillion five-year debt swap program to help local governments address their debt problems. Finance Minister Lan Fo’an added that the initiative will take effect this year and run until the end of 2026.
Fo’an estimates that China’s hidden local government debt ballooned to $2.00 trillion at the end of 2023. He added that the new policy is anticipated to cut the deficit to $320.00 million by year-end 2028.
However, investors found the new stimulus program underwhelming, saying they expected direct fiscal support. Some market participants hoped the People’s Bank of China would promise aggressive interest rate cuts this month.
Commodity specialists stressed that bold measures are needed to revitalize China’s copper and other metal industries. Industrial metal demand cratered following the Evergrande Group’s default in 2021, which sparked a lasting real estate crisis.
Meanwhile, SHFE warehouses reported a 9.00% contraction in copper stockpiles, which mitigated the price decline.
China Worries Trump Win May Curb Copper Demand
Traders cautioned that Donald Trump’s victory in the 2024 US elections may heighten skepticism in China, especially in the copper market. The 47th president-elect has consistently threatened Beijing with harsh tariffs throughout his campaign, accusing the CCP of exploiting America.
Economists expect the Trump Whitehouse to invoke the International Emergency Economic Powers Act to raise tariffs by up to 15.00%. They added that even just a 10.00% tax on all exports to the US could weaken global demand and accelerate inflation.
On the other hand, fiscal experts suggest that Beijing may be waiting for further signals from the US before implementing further stimulus measures. Several Chinese sectors, including the copper industry, need support to help them recover from the economic downturn.
