Metals roundup Feb’ 25: Front running tariffs, and then.....
Image: Mike and Wombo collaboration
Strong (U.S.) dollar, weak China, tariff front running in Feb 2025 🕐
Looking back over the past 12 months, the second derivative of the RBA’s Commodities Price Index, i.e., the month-on-month rate of change in prices (which is what the nextlevelcorporate rate of change charts measure) tells a story of minerals demand collapse, not supply shortfall.
In February. Base Metal prices accelerated by 2.4% whereas Bulks (iron ore and coal) decelerated by 2%.
Why?
Social construction demand from China has collapsed, and China still controls most green mineral (lithium and rare earths) processing, refining and as a consequence is able to manipulate prices and squeeze out potential new supply
The supply of green mineral feedstocks to China has not been banned by producing nations, which is to say that out-of-China supply chains are flawed—they still sell to China Inc! Hello?
The so-called green transition (which is totally dependent on metals and hydrocarbons to power it) is unfunded and hopelessly uncoordinated, and while the ALP is in power down under, we will miss out on the future-facing benefits of nuclear-powered grids and robots that don’t need to sleep and eat.
The USD was far too strong for most of February although the Aussie strengthened and was buying 0.63 USDs by month end.
The cost of capital (driven by interest rates and oversized gains on equities, in turn creating a high market risk premium) is still way too high for financiers in many of the niche/non-terminal metal sectors.
Europe remained in decline for February. While today is a different story with the spectre of serious defence spending lighting up European defence and other industrial—as it has become clear that the U.S. is withdrawing its support for Ukraine—Europe still needs time to heal.
Trump’s growing “USS Alonism” policies (readers of our newsletter will know all about this) has weighed on pricing.
Expectations of more volatility to come with Trump tariffs and his focus on a stronger U.S. dollar standard, despite the market betting otherwise.
No change to the nextlevelcorporate thesis thus far in 2025
For there to be real positive price action and a reversal from bearish to bullish, we need to see: (a) significant weakness in the USD (not there yet); as well as (b) the return of material demand from China (not there yet), presumably after broad-based stimulus in China (not even close) as well as a return of consumption (same jury, same caveat) and not just from unhinged Government spending (aka wallpapered welfare spending that’s occurring in most economies and masking the real pain on main street).
Add to this Xi’s ability to kill a metals market by directing one of his SOEs to price war on the west—and Trump’s blunt instrument policies likely to soften demand for incremental inputs, and his promise to strengthen the USD ‘dollar standard’—and you get a truck full of industrial mineral bears.
And yet miners and their brokers, hankering for fees in a pretty ugly ECM space continue to upsell the “commodities super cycle” and copper mine lead times in an attempt justify why companies and individuals should invest in new capacity.
Like that’s only 1/3rd of the story—with the rest of it already explained above.
Your charts 📈
Base Metals 🔗🏮🔌
Downtrend intact given February’s acceleration was more than likely tariff front running.
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Bulk minerals - inch by inch, still no help from USD 🧱👷♀️🌉
It’s a tale of two completely different cities. The demand and supply curves are normalising. But at the same time Trump’s tariffs are going to be bad for Aussie steel input suppliers (iron ore and met coal).
Even with tariff front running in February, bulk iron and coal prices did not move, neither accelerating nor decelerating.
Copyright, NextLevelCorporate Advisory
Energy minerals (ex-coal and oil) ⚗🧲☢
The July 6, 2023, price high for LME Lithium Hydroxide CIF was US$46,046. On the last day of February, it was US$9,230, down $240 month on month, representing a decline of 79% from its July 2023 peak. The consistent sound you’re hearing is……. ouch...
Reasons? China, tariffs, U.S. reshoring, lack of overall demand beyond China.
Although not included in the index, uranium spot is currently US$63/t—down 10% from last month and still well below its peak in January, with still no change to the ALP’s vacuous stance on uranium.
Commodity price index head and shoulders
The right elbow 👆 was looking strong up until this month, but it’s starting to flatten out.
Dollar Vader is still at work and whereas food is a necessity, industrial metals and minerals are not—and the planet killing green transition is way too woke for Trump—who is winding it back along with the Chips Act.
Like I said last month, Trump could be the reason for us to see this all head south—just like it did during Trump1.0, which you can see in the ‘low and choppy’ tariff reintroduction period between 2017-2021 👆
Will we see the right shoulder of the RBA Index collapse into the 50s?
Maybe, but if you’re looking for a leading indicator on this, perhaps think about how confident you are with our government’s ability to play the meat in the U.S./Sino trade war sandwich.
And on that front, Australia’s track record hasn’t been that great.
Rates, debts and deficits, still high—USD still strong. China still weak. Steel and aluminium tariff double-down liftoff, trade war with Canada intensifying—with metal tariffs doubled just now—and Australia’s iron ore and aluminium exemptions still not confirmed.
Nickel is an utter basket case and even Nickel Industries in Indonesia got smashed.
Like I said last month, there’s way more volatility to come and the only safe place in metals, is the precious space.
Volatility ahead for industrial metals
I’ll say it again, Aussie export commodities are in for a few volatile years—so, you may want to revisit and potentially recalibrate your investment thesis and corporate development strategy if you’ve built your strategy for yesterday’s macro and geopolitical drivers.
Keep an eye on the dollar as Trump guns USS Alonism’s engines (after bludgeoning Canada and Mexico and the rest of the world)—and screams ramming speed.
Trump’s global tariff war (to cut off all avenues for China to sell at lower prices to the U.S. via other countries) is set to drive inflation, but if this escalates and Canada and Mexico join in bludgeoning China with tariffs, we will see demand destruction, falling growth, rising input costs (inflation) and then job losses—a classic stagflationary environment—and ultimately, deflation and recession.
Trump is going after China and encouraging other countries to use similar blunt instrument tariffs to hobble the Dragon or at least ensure cheap China goods do not enter the U.S. through front, back or side doors. Oh, and down under? We won’t be exempt, at least not in the initial period until we give something to Trump. Wonder what that might be?
This, and the Deep Seek moment which gave the world pause to think about AI spending and monetisation, and ridiculously high valuations are why U.S. equity markets are plunging—while capital shifts out of the Mag 7 toward ‘relative’ growth opportunities such as Europe—where defence spending is poised to surge.
Make sure your projects and growth levers (and funding methods) are profoundly robust.
In terms of metals? Only precious metals glimmer right now. But soon, yellow cake and black gold will join their anti-fragile gold and silver cousins. Bring it!
See you in the market.
Mike
With decades of success across six continents, NextLevel Corporate Advisory expertly navigates the intersection of M&A, financial advisory, and business strategy—bringing you exceptional corporate development outcomes.
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