Copper prices, which surged to a record high of over $14,700 a tonne on Tuesday, are expected to remain elevated until US President Donald Trump announces his decision on refined copper tariffs.
The trigger for the current rally in copper prices is fears of the US increasing tariffs on the red metal. The US Department of Commerce has proposed imposing a 15 per cent tariff on refined copper imports starting next year and rising to 30 per cent by 2028.
An investigation report if the tariffs should be imposed was due by June 30. But it has been delayed, and prolonged uncertainty has put pressure on the global market.
“Tariff positioning has pulled large volumes of metal into the US, with COMEX inventories rising to record levels. Meanwhile, less metal is available outside the US, tightening the London market and putting pressure on short positions,” said ING Think, the financial and economic analysis wing of Dutch multinational financial services firm ING.
Exposed to volatility
Research agency BMI, a unit of Fitch Solutions, expects copper to remain caught between macro headwinds and US tariff uncertainty. The market is acutely exposed to further volatility and highly sensitive to West Asia jitters. A sustained de-escalation in the US-Iran conflict would lend further support to the metal, though.
Chinese commodity data group Sunsirs said Washington’s price premium for copper compared to other markets is prompting traders to ship hundreds of thousands of tonnes of the metal to the US.
“As copper inventories become increasingly concentrated in the US, LME deliverable stocks continue to decline, further intensifying pressure on spot supplies,” it said.
ING Think said that if tariffs are approved, they would keep drawing metal into the US. Another exemption or delay could unwind the trade and ease tightness elsewhere.
Policy-driven rally
“The rally looks increasingly policy-driven. Prices could correct sharply if tariffs are delayed or ruled out, particularly as demand remains subdued,” it said.
Sunsirs said it is a case of localised shortages rather than a global demand surplus. “The influx of large volumes of copper into the US has altered the structure of global inventories,” it said.
Copper inventories are increasingly concentrated in the US, whereas copper levels within the LME’s global warehouse network continue to fall. This has intensified pressure on short sellers, said Sunsirs.
Data show that COMEX inventories surged to a record 696,000 tonnes while LME stockpiles have fallen 40 per cent. Supply disruptions in Chile from a mine collapse and adverse weather have added further upward pressure.
Beyond fudamentals
Nonetheless, BMI views the current rally as already extending beyond what fundamentals alone would justify. It cautioned that a more constructive backdrop on both the geopolitical and macro fronts needs to materialise before downside risks can be entirely ruled out. The US tariff decision remains the most immediate directional catalyst.
SunSirs said the LME (London Metal Exchange) copper was in backwardation, with spot copper price significantly higher ($14,737 a tonne) than the three-month futures price. This indicates that near-term supply is tight.
On the other hand, copper cathode imports from Congo rose to a record high of 53,290 tonnes in July. It made up 23.9 per cent of total US copper imports of 220,000 tonnes that month. The imports were higher than total Congo exports of 32,000 tonnes to the US in 2024.
Data centres demand
BMI sees support to prices from converging supply-side pressures, tariff-driven tightness and AI-fuelled optimism, which continue to propel the red metal to successive record highs.
Swiss multinational group UBS said data centres for AI are unlikely to drive a “transformational” change in copper demand. Demand for copper from data centres will rise 4 per cent by 2030 from the current 900,000 tonnes.
Meanwhile, several major mining firms are facing operational challenges. Sunsirs said if mine supply does not recover in the second half of the year, global mined copper production could see its first annual decline since 2017.
On Wednesday, copper dropped to $14,625 a tonne. The red metal has gained 17 per cent year-to-date and 45 per cent year-to-year.