(Kitco News) – Last year was a very eventful one in global metals markets, but 2025 could prove to be a watershed year across the metals complex, with some trends picking up steam while other areas witness unprecedented developments, according to Gregor Spilker and Jon Lynch of CME Group.
The first development is the ushering in of a new era of U.S. trade policy, with President-Elect Donald Trump threatening to implement or increase tariffs on nearly all trade partners exporting goods to the United States, including Mexico, Canada, the European Union, and the BRICS nations.
“The U.S. is a net importer of mineral and metal products, with total imports amounting to $193B compared to $141B exports in 2023,” the authors noted. “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 second item of interest is the elimination of Chinese export tax rebates on key industrial metals.
“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,” they wrote. “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 was the world’s largest single producer of refined copper (44%) and primary aluminum (55%) 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,” the authors said. “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.”
The third area is in battery metals, where the market is waiting for a rebalancing to occur.
“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,” the authors wrote. “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,” they added. “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.”
The fourth key issue has already garnered a great deal of attention in recent weeks: The role of the U.S. dollar in the potential tariffs on precious metals markets.
“Tariffs may have a substantial impact on the relative strength of the U.S. dollar, a critical factor influencing gold prices (and other assets),” they noted. “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.”
The authors added that the high degree of uncertainty about the number and size of Federal Reserve rate cuts “adds yet another layer of complexity that precious metal traders will need to navigate” in 2025.
And the final noteworthy development that the CME believes could have a significant impact on metals markets this year is the increasing liquidity in short-dated options contracts.
“The growing popularity of short-dated options (currently available on gold, silver and copper) is transforming how participants approach metals markets,” they said. “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,” the authors concluded.
