Copper's Floor, Zinc's Surge, Nickel's Edge: How Dollar Weakness and Trade Tensions Are Shaping London Metals' Next Move

The U.S. Dollar Index (DXY) has been in freefall, dropping below 100 for the first time since 2022, and this seismic shift is reshaping the metals market. As U.S.-China trade negotiations teeter between hope and hostility, investors are scrambling to position themselves in copper, zinc, and nickel—three metals poised to capitalize on dollar weakness, supply-demand imbalances, and China's insatiable manufacturing engine. Here's how to play it.

Copper: The Dollar's Fall Creates a Price Floor

Copper is the poster child of this metals rally. With the DXY sliding to 98.87 by May 26, 2025—a 1.25% drop from May 20—dollar-denominated copper becomes cheaper for global buyers, especially in Asia. This dynamic has already pushed copper prices to $9,500/ton, despite lingering demand fears.

Why now?
- China's stimulus tailwind: Beijing's focus on infrastructure spending and EV subsidies is boosting copper demand for EV batteries, power grids, and construction.
- Supply constraints: Glencore's mine closures in Africa and Chile's water shortages are tightening supplies. Even a partial U.S.-China trade deal could accelerate demand, as tariffs on Chinese copper imports remain unchanged.

Action: Buy copper futures or ETFs (e.g., JJC) now. The DXY's decline has created a $9,000/ton floor, with upside to $10,000 if trade tensions ease.

Zinc: Supply Crunch Meets Manufacturing Resilience

Zinc, often overlooked, is a sleeper hit. Despite a 4.4% dip in early 2025, its fundamentals are gold-standard:

• Supply shock: Falling mine production in Peru and Australia, plus low LME inventories (50,000 tons, a 10-year low), are setting the stage for scarcity.
• Demand resilience: China's property sector may be weak, but its solar and EV industries are booming. Zinc is critical for solar panel frames and EV batteries.

Why act now? Zinc prices could jump to $3,500/ton by year-end if Chinese manufacturing data (PMI) improves. Short positions are at record highs, primed for a squeeze.

Nickel: The EV Battery Play with a Structural Edge

Nickel's story is about supply bottlenecks and insatiable demand from EVs. China's nickel imports surged 15% in Q1 2025, even as Indonesia's export bans and Russia's sanctions disrupt flows.

• Battery demand: Tesla's Shanghai Gigafactory 2 expansion and BYD's dominance are driving lithium-ion battery production, which requires 80 kg of nickel per megawatt-hour.
• Geopolitical tailwinds: U.S.-China tariff disputes have shielded domestic producers, but a weaker dollar keeps nickel affordable for global buyers.

Action: Nickel could hit $30,000/ton by early 2026. Use ETFs (e.g., JJN) or invest in miners like Glencore (GLEN.L) or Norilsk Nickel (GMKN.ME).

Trade Tensions: The Double-Edged Sword

While U.S.-China talks could ease tariffs on select goods, systemic friction persists. A temporary truce might stabilize prices, but sector-specific tariffs (e.g., on steel and aluminum) remain, creating artificial scarcity for metals like zinc and nickel.

Risk alert: If talks collapse, copper's price floor could crack. Stay nimble—set stop-losses at $8,700/ton for copper.

Conclusion: Time to Move—Before the Rally Leaves You Behind

The metals market is at a crossroads: a weaker dollar is eroding the greenback's safe-haven status, while China's economy and EV revolution are fueling demand. Copper is the anchor, zinc the wild card, and nickel the high-beta play.

Actionable positions:
1. Long copper futures (target $10,000/ton).
2. Buy zinc ETFs (target $3,500/ton).
3. Allocate 10–15% to nickel stocks (e.g., JJN, GMKN.ME).

The window is open—but with trade talks volatile and the DXY's next move uncertain, act now.

Data sources: DXY historical data (Fusion Media), LME inventories, IMF trade forecasts.