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Daily Base Metals Report

Trade Tensions and Manufacturing Weakness Pressure US Assets

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Authors
Daria Efanova

Daria Efanova Head of Research

Viktoria Kuszak

Viktoria Kuszak Research Associate

Contact research Contact Industrial Commodities

Summary

  • US assets came under pressure amid renewed trade tensions with China and Europe, compounded by domestic manufacturing weakness.
  • Aluminium remained subdued despite an increase in tariff rates to 50%, with most of the volatility absorbed by the COMEX/LME copper arbitrage.
  • Gold benefitted from this heightened uncertainty the most, rallying more than 2.5%.

Macro

US stocks opened the week on the back foot as a series of macroeconomic and trade developments dampened risk-on sentiment. Markets slipped at the open after China accused the US of violating the terms of their recent trade agreement, vowing to take countermeasures to defend its interests. This announcement, combined with the US imposing higher tariffs on aluminium and steel and EU warnings about accelerating retaliatory tariffs if trade talks stall, weighed on investor risk appetite. Despite these developments, muted market reaction suggests a growing desensitisation to tariff headlines.

From the macroeconomic perspective, US factory activity contracted to 48.5 in May, the third consecutive monthly decline, as a key import gauge fell to a 16-year low as firms scaled back shipments amid elevated tariffs. Although the 90-day pause on most tariffs remains in place for another month, ongoing uncertainty appears to have prompted purchasing managers to pull back on imports.

The dollar index weakened, retreating to recent lows of 98.70, while US Treasuries also declined amid the broad-based weakness across American assets as uncertainty surrounding President Trump’s trade policies intensified. In particular, market focus shifted to the widening federal budget gap and growing debt burden, both of which are weighing on the outlook for long-dated US government bonds. The 30-year yield is once again approaching the critical 5.0% threshold, signalling that investors may be pulling back from the longest maturities in favour of shorter-duration bonds.

Base Metals

President Trump has increased tariffs on aluminium and steel from 25% to 50%, effective June 4th. Despite this sharp increase in tariff rates, neither LME nor COMEX aluminium prices reacted to the announcement. LME prices remained rangebound, holding just above the $2,450/t support level at $2,466/t. 

While COMEX aluminium futures are physically deliverable to a global network of warehouses, COMEX copper offers delivery at facilities located in the US, making it more sensitive to tariff announcements. As a result, the COMEX/LME copper arbitrage surged overnight, jumping to $1,400/mt due to tariff volatility. Meanwhile, LME copper remained rangebound, capped by a resistance level of $9,600/mt. 

Lead and zinc prices strengthened but faced strong resistance at $2,000/t and $2,700/t, respectively. Nickle bounced back above the $15,500/t mark as tin held its nerve at $30,700/t. 

Precious Metals and Oil

Gold benefitted from current uncertainties the most, rising to retest its recent highs of $3,370/oz. Meanwhile, oil prices surged higher after OPEC+ increased crude production by less than expected, prompting WTI and Brent to strengthen to $62/bbl and $64/bbl, respectively.

Lme Metals Price And Volume 02062025

All price data is from 02.06.2025 as of 17:30

Disclaimer

This is a marketing communication. The information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy, sell or otherwise deal in any particular investment. Please be aware that, where any views have been expressed in this report, the author of this report may have had many, varied views over the past 12 months, including contrary views.

A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

Please contact the author should you require a copy of any previous reports for comparative purposes. Furthermore, the information in this report has not been prepared in accordance with legal requirements designed to promote the independence of investment research. All information in this report is obtained from sources believed to be reliable and we make no representation as to its completeness or accuracy.

This report is not subject to any prohibition on dealing ahead of the dissemination of investment research. Accordingly, the information may have been acted upon by us for our own purposes and has not been procured for the exclusive benefit of customers. Sucden Financial believes that the information contained within this report is already in the public domain. Private customers should not invest in these products unless they are satisfied that the products are suitable for them and they have sought professional advice. Please read our full risk warnings and disclaimers.

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