How will a trade war affect metals price?

In the last month Rusal, one of Russia’s largest aluminium producers, has seen its shares plummet. It has also found itself largely cut off from global markets, due to the recent sanctions initiated by President Donald Trump on aluminium imports to the United States. 

This slump in Rusal shares has an added a sting to the tail for investors, as the very metal that the company produces has had one of its best weeks on record.

These two trades bring into sharp focus the potential market moves that may occur in other areas, as the globe seems to be moving closer and closer to a formal trade war. The difficulty is in establishing just where the winners and losers will be.

In another area, Russian politicians have single-handedly offered up a platform for Canadian miner Cameco to reopen a high grade uranium mine that it had mothballed earlier in the year in Canada. Producing uranium at current prices is becoming increasingly difficult in countries where wages are high. Uranium prices are 70% below where they were in the wake of the Fukushima tragedy in 2011, but legislators in Russia have proposed measures that would halt enriched uranium exports to the US. This has the potential to play into Cameco’s hands.

Nickel prices have also risen to a three-year high, but some analysts suggest that the biggest player in that space, Norilsk Nickel may be too big to sanction? This is another consideration when looking at where the winners and losers will be.

John Meyer, partner and mining analyst at SP Angel, says that commodities generally are likely to be supported by the action of President Donald Trump but, depending on how production is curtailed and who takes it up, it will be difficult to establish clear lines of winners and losers. 

Meyer also says that the synchronised global growth is likely to underpin a firmer pricing environment for metals, but he says to keep an eye on developments, as it will be interesting to watch the sector as the main protagonists of the trade spat take positions, and global mining companies jostle for position to fill gaps in the market.

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