Copper prices are skyrocketing, and a potential 50% U.S. tariff could push them to uncharted territory.
According to Oil Price.com, Comex copper prices, already up 23% since early April, are just $266 per metric ton shy of their all-time high set in late March, fueled by tariff threats, dwindling global stocks, and tight raw material markets, though economic headwinds and green energy disappointments loom large.
Let’s rewind to the start of this saga. Back in late February, a U.S. investigation into copper imports kicked off, raising eyebrows among market watchers. This scrutiny set the stage for a price divergence, with Comex copper now trading at a 16% premium over LME prices.
Fast forward to early April, and Comex prices began their steep climb, resuming an uptrend after a brief June pause. LME prices, though lagging behind their May peak, still gained over 14% in the same period.
The real bombshell dropped on July 7, when President Trump signaled a hefty 50% duty on copper imports. While the timing and final rate remain unclear, this announcement has supercharged Comex prices, creating a stark premium over LME benchmarks.
U.S. buyers, anticipating this move, stockpiled duty-free copper in the first half of the year. Now, with tariff clarity emerging, they’re racing to secure more material before the window slams shut. This hoarding has boosted Comex stocks, even as global inventories shrink.
Globally, the picture is grim—warehouse stocks are depleting fast. LME stocks have been on a downward spiral for nearly a year, with much of the remaining material being Russian copper, shunned by U.S. and European buyers due to sanctions. This scarcity has tightened the spot market, pushing it into backwardation where spot prices outstrip three-month futures.
Raw material markets are equally strained, especially with China’s copper smelting industry expanding. Smelters there are accepting zero processing fees—a historic low compared to last year’s $88 per metric ton benchmark. Meanwhile, spot charges hover around negative $43 per metric ton, signaling desperate competition for supply.
Supply concerns aren’t easing anytime soon. Tight conditions persist amid global electrification efforts, even as Chinese smelters ramp up to record output. Mining is being incentivized, but it’s a slow fix for a fast-moving crisis.
Tariffs are a double-edged sword for copper. While they’ve propped up prices in the short term, they risk stifling U.S. manufacturing demand and stoking inflation. Long-term, global growth could take a hit, especially with ongoing trade tensions involving key partners like Japan and South Korea.
Trade negotiations with the UK, China, and Vietnam show some promise, but talks with the EU, Mexico, and Canada remain unresolved. This uncertainty keeps investors on edge as copper nears critical resistance levels. The green energy sector, once a copper demand darling, is faltering. Wind energy and electric vehicles haven’t met lofty expectations, and reports suggest China’s EV boom—propped up by subsidies—may be a bubble, with numerous firm closures in recent years.
For investors, the U.S. dollar’s role can’t be ignored. Its drop below long-term support earlier this year—its worst since 1973—has buoyed commodity prices like copper, which trade inversely to the greenback. Recent stabilization, partly due to tariffs, hasn’t fully reversed this trend.
What’s next for wealth-builders? Consider hedging against volatility—copper ETFs or mining stocks could offer exposure without direct commodity risk. Keep an eye on tariff developments; a lower-than-expected duty rate could trigger a price pullback.
Bottom line: The copper market is a pressure cooker, squeezed by tariffs, tight supply, and wavering demand. Free markets thrive on clarity, not government distortions—yet here we are, navigating another policy-driven storm. Stay frugal, stay informed, and position yourself for the inevitable shifts ahead.