US President Donald Trump’s decision to investigate the potential threats posed by copper imports to national security has led to a significant surge in global copper prices.
By signing an executive order for the probe, Trump has tasked the US Commerce Department with exploring ways to address this threat, including the possibility of implementing tariffs, export controls, or incentives to boost domestic production within 270 days.
Although Canada and Mexico are currently exempt from all tariffs under the United States-Mexico-Canada trade agreement, the market is still feeling the effects of Trump’s order. Any restrictions on imports could force the US to rely heavily on its two major smelters, as the country currently imports 50 percent of its copper needs. In 2024 alone, the US imported 850,000 tonnes of copper excluding scrap.
The prices of copper on Comex, a leading platform for trading commodities futures in precious and base metals, have soared to nearly record levels of $5.10 per pound ($11,330 per tonne), creating a significant premium over rates on the London Metal Exchange (LME), where the copper three-month contract is currently trading at $9,880 per tonne.
The surge in copper prices on Comex, which has seen a 25 percent increase this year compared to a 13 percent increase on LME, is largely attributed to the fears surrounding the trade war rather than economic growth.
Trump’s probe into copper imports has not only driven up global copper prices but has also caused disruptions in the flow of copper cathodes, impacting Chinese export quotations for domestic copper cathode rods. As a result, Chinese domestic supplies have tightened, leading to price increases for raw materials.
Despite these developments, demand for copper from China, the world’s largest consumer, remains strong due to increased manufacturing activities and Beijing’s efforts to stimulate the economy through spending.
Looking ahead, ING Think believes that copper prices will continue to be supported in the short term by the anticipation of tariffs and tightening of the ex-US physical market. However, in the long term, tariffs could have a bearish impact on copper and other industrial metals as global growth slows and inflation persists.
Overall, the recent developments surrounding copper prices highlight the complex interplay between geopolitical policies, trade dynamics, and economic conditions that continue to shape the global commodities market.
