Rio Tinto gets bump from China export tweak, but US dollar curb looms
On Monday morning major mining companies saw an uptick in activity after China decided to eliminate the 13% tax rebate for copper and aluminum semi finished exports; however the sector may face challenges in the months due, to the strengthening US dollar.
Citi, a US investment bank pointed out that the announcement from Beijing Friday led to a more than 7% increase, in LME aluminum prices.
The elimination is anticipated to discourage the export of semiconductors from China aluminum causing an increase in the LME/ShFE ratio, at first glance but we anticipate that this momentum will not endure entirely.
"We have decided to keep our price range of $0 to $3000 per ton at $2600 per ton (with an average of $2500 per ton for the fourth quarter of 2024). This decision is based on our belief that any positive impact from the removal of tax rebates may lessen over time. Additionally we anticipate growing concerns about tariffs in the weeks. Our current expectation is for a solution to be reached regarding the problems with shipments, from Guinea."
Historically Citi also pointed out that a robust dollar tends to impact miners because it diminishes the buying capacity of major commodity consuming markets.
"A stronger US dollar often leads to monetary conditions becoming more restrictive."
Mining stocks typically face challenges due to these two factors working together in opposition to them most of the time.. Enough though during the past week the rise in the value of the US dollar index after the US election results correlated with a decrease, in the value of mining company shares.
Based on our examination of data spanning over the two decades it appears that there is an inverse correlation, between the strength of the dollar and the performance of mining company stocks.
The connection between commodities and the US dollar over a six month period has consistently shown a trend and is getting closer, to its long term average of. 03.
Rio Tinto Ltd (listed on the London Stock Exchange as RIO and on the Australian Securities Exchange as RIO and traded over the counter as RTNTF) a major global provider of copper and aluminum products experienced a 1 percent increase, in value to reach 4,857 pence.
Shandor Brenner is an American journalist recognized for his sharp and insightful reporting on social and political issues. His work is known for its depth, integrity, and the ability to highlight critical societal concerns.
