2024 was an eventful year in metal markets, with gold marking a stellar year that included record high prices and posting an annual return of 25%, its best performance since 2010. Industrial metals were caught between optimism about infrastructure spending, to accommodate AI data center growth and energy transition applications on the one side, and a weak Chinese domestic market pulling down global growth outlooks on the other. In the U.S., the Federal Reserve has started its easing cycle and a new U.S. administration with strong views on trade and tariffs is about to take power. Here are five items to watch in the coming year.

A new chapter in U.S. trade policy

U.S. President-Elect Donald Trump has threatened to implement or increase tariffs on nearly all trade partners exporting goods to the U.S. Included in that list of targets are Mexico, Canada, the 27 countries that make up the European Union and the BRIC Alliance Nations (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates). 

The U.S. is a net importer of mineral and metal products, with total imports amounting to $193B compared to $141B exports in 2023.[1] Those import figures include over $34B of Steel mill products, $20B of Aluminum products and $14B in Copper products. Top trading partners like Canada (19% of all imports), China and Mexico (11% each) will all potentially be targeted. Traders and market watchers will closely follow the impact of U.S. imposed tariffs and potential reciprocal actions by trading partners on trade flows and metal pricing, with the potential for different tariff regimes to lead to bifurcated pricing between regions and trading partners.

The impact of eliminating Chinese export tax rebates on copper and aluminum

Announced on November 15, 2024, and put into effect on December 1, 2024, the Ministry of Finance and the State Taxation Administration of China eliminated tax rebates for exports of aluminum and copper. While the prices of both aluminum and copper increased slightly on that news, the full impact of this policy change is yet to be seen. China is, by far, the largest producer of refined copper and primary aluminum in the world, while accounting for more than 44%[2] and 55%[3], respectively, of global production in 2023. In 2024, exports of refined copper from China reached a record level, monthly, in June of 2024, and on an annual basis, through November, reaching nearly 450K metric tons, thereby surpassing the previous full year record level from 2016.  Eliminating tax rebates on exports could signal that China is experiencing an increase in domestic demand and wishes to disincentivize exports. This would inevitably decrease supply available outside of China. However, if the demand increase fails to materialize, then removing that amount of metal from the global supply pool may not be as impactful as some anticipate.

Chart 1 – Copper and Aluminum prices

Battery metals: waiting for market rebalancing

Cobalt and lithium prices remained under significant pressure throughout 2023 and 2024, weighed down by oversupply concerns and a deceleration in growth across key demand markets. As the industry enters 2025, investors will be eagerly watching for signs of market rebalancing, especially if electric vehicle (EV) adoption and energy storage expansion regain momentum. Supply-side adjustments in the form of mothballing production facilities and canceling or scaling back expansion plans could play a pivotal role in stabilizing these markets, and the recent acquisition of Arcadium Lithium by mining major Rio Tinto could turn out to be a turning point for lithium markets. 2025 may prove to be a pivotal year across battery metals, with the potential to restore confidence and attract renewed investment interest. The forward curve for both cobalt and lithium is strongly upwards sloping, indicating that the market expects some form of rebalancing to occur versus today’s oversupplied market.

Chart 2 – Contango in cobalt and lithium derivatives

Precious metals: tariffs and the dollar's role

As mentioned above, discussions about tariffs and trade policies will take center stage in 2025. Tariffs may have a substantial impact on the relative strength of the U.S. dollar, a critical factor influencing gold prices (and other assets). Trade tensions or protectionist measures that are expected to strengthen the dollar could have a negative impact on gold prices. At the same time, central banks are likely to maintain strong gold-buying activity to diversify national currency reserves and there is no shortage of geopolitical hotspots, which brings demand for safe haven assets. In addition, there is high uncertainty how many Federal Reserve rate cuts are on the table in the new year, which  adds yet another layer of complexity that precious metal traders will need to navigate this coming year.

New options on the menu: the rise of liquidity in short-dated options

The growing popularity of short-dated options (currently available on gold, silver and copper[4]) is transforming how participants approach metals markets. In 2025, traders and hedgers could further increase their use of weekly and daily options to capitalize on short-term price movements and to manage event-driven risk. This is particularly relevant for metals markets, which could experience increased volatility considering tariff discussions, geopolitical turmoil and the macro impact of the ongoing energy transition. Increased adoption of short-dated options reflects heightened interest in tactical, near-term trading strategies in this new environment.

Chart 3 – Weekly options on the rise

References

[1] https://www.usitc.gov/research_and_analysis/tradeshifts/2023/minerals. Total import and export figures exclude precious metals and coins as well as gemstones.
[2] https://www.nasdaq.com/articles/top-10-copper-producers-by-country-updated-2024
[3] https://international-aluminium.org/statistics/primary-aluminium-production
[4] CME Group is also introducing weekly platinum and palladium options, which will be available in February 2025 subject to regulatory review.

 


All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

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