Copper At Near 5-Month High As Tariffs Loom – OilPrice.com

Andrew Topf

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• Copper prices are surging due to anticipated U.S. tariffs on imports.
• The U.S. relies on imports for 45% of its copper consumption, and a 25% tariff could disrupt supply chains.
• A long-term copper shortage looms, with major producers like Chile and Peru facing declining output and resource nationalism.

The expectation of tariffs on US copper imports is helping to push copper prices higher, along with tight supply, robust demand, and events in China, the world’s largest consumer of the industrial metal.

Mining.com reported copper prices traded near a five-month high Monday, due in part to the Chinese government’s unveiling of an action plan over the weekend by to boost consumption. Demand from China’s property sector, a key source of metals demand, has been weak.

Copper for May delivery on the Comex in New York was trading 1% higher at $4.49 per pound or $9,900 per tonne. They have risen about 12% this year after President Trump signed an executive order initiating a Section 232 review of copper imports. The review assesses the impact of imports on national security.

The red metal hit an all-time high of $5.20 per pound in May 2024 due to a supply squeeze. The transition to renewable energy, the rise of electric vehicles, and the growth of artificial intelligence (AI) have all increased demand for copper.

Chile is the world’s largest copper producer and the price forecast from its copper commission, Cochilco, puts copper at $4.25 a pound in 2025 and 2026. It expects copper to remain above $4/lb for the next decade.

Citigroup expects London Metal Exchange (LME) copper to hit $10,000 per tonne in the next three months ($4.53/lb) as the global market for copper remains tight until the timeline for US import tariffs becomes clearer.

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While the Trump administration has not officially announced it, a 25% copper tariff is on the horizon. In an address to Congress, US President Trump stated, “I have also imposed a 25% tariff on foreign aluminum, copper and steel. Tariffs are about making America rich again. It is happening, and it will happen rather quickly.”

Like Citigroup, Morgan Stanley also anticipates further gains in copper prices amid expectations of potential US tariffs.

“With tariffs not yet imposed, there is a strong incentive to send metal to the US, tightening markets in the rest of the world as well,” Morgan Stanley said via Mining.com. Major commodity traders such as Glencore and Trafigura are rushing to ship copper to the US ahead of the tariff announcement.

If a 25% tariff on copper imports comes to fruition, it would significantly impact the domestic copper market, states Metal Miner, considering rising electrification needs and ongoing grid developments.

US reliance on copper imports has grown considerably over the past two decades. The US Geological Survey says imports now account for roughly 45% of domestic consumption.

Copper demand

The transition to clean energy is fueling a massive increase in copper demand. According to Forbes, the “mineral of electrification” is essential to manufacturing and construction in traditional and emerging U.S. industries, alike. Electrical uses of copper, which include power generation and transmission; wiring in offices, hotels, and other structures; telecommunications; and electrical and electronic products account for about 75% of total copper demand. But copper is also used intensively in transportation equipment and infrastructure, industrial machinery, and a growing number of products.

Copper shortage

To electrify the global vehicle fleet requires bringing into production 55% more new mines. Between 35 and 195 large new copper mines would have to be built by 2050, at a rate of up to six mines per year. In heavily regulated environments like the United States and Canada, it can take up to 20 years to build a mine from scratch.

The world’s largest copper miner, Chilean state-owned Codelco, recently warned that production this quarter will be similar or slightly below year-ago levels due to maintenance work at its El Teniente underground operation in central Chile.

The country, the world’s largest copper producer, saw its output decline by 24% month-over-month in January, marking a nine-month low. 

Not only is Chile lessening its copper output due mainly to lower grades and drought conditions — copper mining uses a lot of water — the government is also increasing state intervention in its resources. The same thing is happening in Peru, the third biggest copper miner.  

For example, in April 2023, Chile announced that all lithium projects must be structured as public-private partnerships, with the state holding a majority stake. Chile produces nearly a quarter (24 percent) of the world’s lithium mostly through brine operations.

Other countries are also becoming more resource nationalistic. According to a new report from Verisk Maplecroft, over a third of copper production now occurs in “high” or “very high” risk countries, up from just 17 percent in 2016.

“Producing countries are implementing export bans, establishing state-owned companies, and in some cases, nationalizing entire mineral sectors. Whether justified by the energy transition, tech industries, or military preparedness, countries everywhere want their piece of the critical mineral pie,” states Thea Riofrancos, a political science professor and author of the forthcoming book ‘Extraction: The Frontiers of Green Capitalism’. (Mining.com)

CNBC last year wrote that copper is a vital component for the construction and defense industries as well as a key component in electric cars wind turbines and the power grid.

“But mining companies are having a hard time keeping up.”

The article quotes the International Energy Agency stating that existing mines and projects under construction will meet only 80 percent of copper needs by 2030.

By Andrew Topf for Oilprice.com

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