"Forecast Completely Off"... Panic Buying Over US Tariff Fears Leads to 'Despair'

Korea Economic Daily

Summary

It was reported that returns of industrial metal ETFs, such as "copper" and "palladium," have plummeted.
It was explained that the drastic cooling of investment demand was due to changes in the US government's tariff policy.
Market experts analyzed that advance demand for copper has already been met, making a price recovery unlikely.

Impact of US Tariff Exemption... 'Sharp Drop in Returns'

Cooling Enthusiasm for Copper and Palladium ETFs

Returns for exchange-traded funds (ETFs) investing in industrial metals such as copper and palladium have plummeted. This is mainly due to the rapid cooling of investment demand after copper was excluded from tariff targets.

According to financial information platform ETF CHECK on the 19th, in the past month, the domestic ETF with the lowest return was 'KODEX Copper Futures(H)' (-19.19%). The second-worst performer was 'RISE Palladium Futures(H)' (-14.74%).

Copper and palladium prices had steadily risen so far this year, driven by expectations that the US government would impose a high tariff of up to 50% on copper. Real demand from US companies surged as they rushed to buy copper ahead of the tariff implementation, followed by speculative capital seeking short-term gains. The fever for hoarding industrial metals, sparked by copper, spread to other commodities such as palladium.

The situation changed when the US government set lower-than-expected tariffs on copper. Rather than a broad tariff on all copper, a 50% tariff was only imposed on semi-finished forms such as copper pipes, rods, and plates. KODEX Copper Futures(H), which invests in copper futures traded on COMEX, plunged 22% in a single day on May 31st, the first trading day after the tariff structure was finalized. Choi Jin-young, a researcher at Daishin Securities, noted, "Speculative demand flooded copper traded on COMEX, causing the price gap with the London Metal Exchange to widen to $2,900 per ton. After the tariff was imposed and the bubble burst, the gap narrowed to about $70."

Market experts believe that since advance demand for copper has already been met, it will be difficult for prices to recover in the near term. Researcher Choi analyzed, "US companies have already completed their copper stockpiling. With inventories sufficient, it is unlikely that copper prices will return to pre-tariff levels."

Reporter Suji Na suji@hankyung.com