Gold is not the only metal which prices have demonstrated record growth rates during a period of increasing geopolitical turbulence and intensification of fears related to the tightening of tariff confrontation between countries.
Last Wednesday, March 26, copper prices in New York reached a record high. The corresponding upward dynamic was recorded after the media published information according to which the President of the United States, Donald Trump, may impose tariffs on imports of the mentioned metal in the coming weeks. Wall Street expected the specified levies to take effect in the current year, but not so quickly.
The media published information that Donald Trump may impose tariffs on copper, citing insiders who are aware of the plans of the president of the United States, which have not yet been finalized.
It is worth mentioning that last month, Mr. Trump directed the US Commerce Department to open an investigation into potential levies on imports of the mentioned metal and submit a report on the matter in 270 days. Currently, it is expected that a decision on the specified issue will be made earlier. The insiders referred to by the media have used the right of anonymity, since in this case, it implies a confidential discussion of possible measures.
The informants of the journalists note that the above-mentioned investigation no longer has signs that it corresponds to such a concept as a formal procedure, which is more symbolic in nature than being the source of a certain practical result. The corresponding statement is based on the fact that Donald Trump has repeatedly spoken about tariff intentions as a prospect with a high level of realism, without using these plans in the context of the paradigm of strictly populist rhetoric.
According to media reports, referring to an official who spoke to reporters on condition of anonymity, the Mr. Trump administration is currently proceeding expeditiously with the review. This means that a decision on copper import tariffs can be made well before the expiration of the 270-day deadline.
The White House did not respond to a media request for comment on the mentioned information, which is insider information and still needs to be verified at the official level. At the same time, it is worth mentioning that last month Peter Navarro, a White House trade adviser, said the investigation would proceed quickly. At that time, it was also noted that the United States Secretary of Commerce, Howard Lutnick, would act as quickly as possible to obtain the results of the investigation on the Donald Trump desk to decide on possible measures.
Mr. Trump has threatened to impose a duty of 25% on all copper imports. The realization of the relevant intention, which so far is a potential probability rather than an inevitable circumstance of trading reality, can roil the global market for one of the most ubiquitous metals in the world. Copper is used in pipes and electrical cables.
According to media reports, a quick decision to impose tariffs on imports of the mentioned metal would be a practice in stark contrast to the investigations that preceded the levies on steel and aluminum shipments to the United States during Donald Trump’s first presidential term. They took about 10 months to complete.
The likely tariffs on copper imports are part of a broader comprehensive effort by the Donald Trump administration to increase domestic production of critical minerals in the United States. This is in addition to the emergency measures that were introduced last week to accelerate the development of new metals and mining projects. At the same time, the construction of new copper production capacities can take years. It is also worth noting that the entry into force of tariffs will generate a situation in which manufacturers based in the United States will pay much more for the mentioned metal than their foreign competitors.
Copper futures on New York’s Comex rose 3.1% on Wednesday, reaching a record $5.374 per pound. A little later, this figure dropped to $5.274. The benchmark price on the London Metal Exchange fell 2.2% to $9,893 a metric ton, briefly widening the gap between the two contracts to more than $1,750 a ton.
The large difference between prices in London and New York has led traders and dealers around the world to seek to supply the red metal to the United States to capture a lucrative premium. Against this background, the rest of the world, especially China, which is the largest consumer of copper, is short of this metal.
Li Yaoyao, an analyst with Xinfu Futures Co, said the drop in copper prices in London reflected lower expectations of fierce competition, as traders may not have enough time to ship out more metal to the United States before tariffs take effect. It was also noted that it’s really about, how many weeks the levies will land.
Donald Trump, in his March 5 address to a joint session of Congress, stirred uncertainty when trying to defend his tariffs.
Goldman Sachs Group Inc. expected the 25% copper tariff to take effect in the fall of the current year. This was reported by analysts of the mentioned financial institution at the present week. They also suggested that since tariffs are likely to take effect earlier, the gap between Comex and LME prices, currently at about 17%, will increase further. Besides, analysts including Eoin Dinsmore said that taking into account the uncertainty about the level of levies and high inventories in the United States, they assume that in the near future, an implied tariff of 20% should be the cap. It was also noted that the mentioned level is regularly referred to as a good exit point in numerous meetings with clients.
Since the beginning of the current year, copper prices have soared by 30%. The main reason for the mentioned upward dynamic is that in the United States, buyers are trying to stockpile red metal due to concerns about potential tariffs. The growth rate of copper prices outpaced the intensity of the upward dynamic in gold prices, which increased by 16%. Also, a surge of red metal far outpaced the major United States stock indexes this year.
Ole Hansen, head of commodity strategy at Saxo Bank, said that copper, a major industrial metal that has yet to be included in Donald Trump’s expanding catalog of tariff-hit products, continues to rally on the assumption that it is just a matter of time.
It is worth noting that red metal is not a rare earth mineral nor one of the 50 critical minerals designated by the US Geological Survey. However, in 2023 the United States Department of Energy deemed copper a critical material for energy. Red metal is widely used in construction and manufacturing. Copper is essential for electronics, energy, and defense.
Ole Hansen stated that the spike in New York red metal futures prices is not the result of fundamental consumer demand, but rather major stockpile shifts to the United States amid tariff speculation.
Commodities giant Mercuria estimates in the current month about 500,000 tons of copper are being shipped to the US. The media noted that this figure significantly exceeds the standard monthly import volume of approximately 70,000 tons.
Adam Turnquist, chief technical strategist at LPL Financial, stated that front-running the potential tariff has unleashed a wave of near-term demand for copper housed in the United States.
Goldman Sachs analysts suggest that shipments of the red metal to the US are likely to be accelerated. They estimate that copper imports could reach 200,000 tons next month.
The jump in prices for the red metal recorded this week is related to concerns about tariffs, but at the same time, it is worth noting that the corresponding indicator was already on an upward trajectory last year, although it showed a more moderate growth rate. The reason for the increase in copper prices in 2024 was global demand. As already mentioned, red metal is essential for energy. It is also worth noting separately that copper is used in the electric vehicle manufacturing sector. The demand for red metal in the mentioned industry demonstrates what can be described as consistent growth.
Ole Hansen stated that the recent US stockpiles could leave the rest of the world with a smaller reserve. The International Energy Agency, based in Paris, predicts that by 2035 there may be a situation in which global demand for copper will be met by only 70%.
Glencore, a commodities giant, suspended production at one of its copper smelters in Chile this month. Against this background, shipments decreased, which, according to media reports, also became a factor in rising prices for the red metal.
Currently, concerns about uncertainty are intense and active in terms of the impact on certain indicators, primarily financial ones, and speculation is reaching a peak, but Wall Street still has to wait and see what final decision the Donald Trump administration will make regarding tariffs on copper imports.
Analysts at Commerzbank said that there may be a price correction, at least temporarily. In their opinion, this will happen as soon as the pull-forward effect on US demand ends.
As we have reported earlier, Donald Trump Announces New Auto Tariffs.
