Most Shanghai Base Metals Slip on US-China Trade War Jitters

The Shanghai base metals market saw a decline on March 5, 2025, as rising tensions between the United States and China rattled investor sentiment. The escalation of the trade war between the two largest economies in the world has raised concerns over global demand, supply chain disruptions, and tariffs that could impact the metals industry. As a result, most base metal prices on the Shanghai Futures Exchange (SHFE) experienced a downturn, with copper, aluminum, and nickel facing the most significant losses.

Market Performance on March 5, 2025 According to market reports, the most-active copper contract on the SHFE was down 0.1% at 77,060 yuan ($10,614.03) per metric ton by 0405 GMT. Similarly, aluminum and nickel prices fell, tracking losses in global commodities markets. The declines reflect investor uncertainty regarding the long-term impact of the US-China trade conflict on industrial metals and global economic growth.

Factors Behind the Decline Several key factors contributed to the decline in Shanghai base metal prices:

1. Escalating Trade Tensions: The US government announced new tariffs on Chinese imports, prompting China to impose retaliatory tariffs on American goods, including raw materials and industrial metals. This tit-for-tat tariff escalation has created concerns over reduced demand and supply chain disruptions.
2. Weaker Demand from China: China, the world’s largest consumer of industrial metals, is facing economic challenges, including a slowdown in manufacturing activity and weaker-than-expected demand for key metals such as copper and aluminum.
3. Stronger US Dollar: The appreciation of the US dollar has made commodities more expensive for buyers using other currencies, further dampening demand for base metals.
4. Stock Market Volatility: Ongoing uncertainty in global financial markets has led investors to shift their focus to safer assets, such as gold and US treasury bonds, reducing speculative interest in base metals.

Impact on Key Metals

• Copper: The SHFE copper contract fell slightly due to concerns over disrupted trade flows and potential declines in global demand. Copper is often seen as a barometer of economic health, and its price movement reflects broader market sentiment.
• Aluminum: Prices slipped as traders worried about weaker industrial activity and supply chain bottlenecks.
• Nickel: The market for nickel, a critical metal for electric vehicle batteries, was affected by fears that trade restrictions could limit supply and dampen demand.

Outlook for the Metals Market Market analysts believe that the short-term outlook for Shanghai base metals remains uncertain. If trade tensions continue to escalate, industrial demand could take a hit, further pressuring metal prices. However, some experts argue that any significant price drops could present buying opportunities for long-term investors, especially if demand from the clean energy and infrastructure sectors remains strong.

In the coming weeks, traders and analysts will closely monitor any developments related to US-China trade negotiations, economic data from China, and global monetary policies that could impact commodity markets.