Copper Prices Near Five-Month High Amid Supply Constraints and US Tariff Concerns

US Tariff Speculation Drives Copper Import Surge

In late February, US President Donald Trump initiated a Section 232 review of copper imports, assessing their impact on national security. This has sparked widespread speculation that tariffs on copper imports may soon follow.

As a result, traders are rushing to bring copper into the US before any tariffs take effect. Analysts at Goldman Sachs predict that US copper imports could increase by **50-100%** in the coming months. This could push US copper inventories to between **300,000 and 400,000 tons** by the end of Q3.

The anticipation of tariffs has created significant market volatility, with buyers and manufacturers hedging against potential price increases. If tariffs are imposed, domestic US smelters may struggle to meet demand, further pressuring supply.

Global Copper Inventories Tighten as Supply Shrinks

Supply constraints continue to tighten global copper markets, driving prices higher. Some key factors include:

• Chile’s Copper Output Decline: In January, Chile—the world’s largest copper producer—reported a **24% month-over-month** decline in production, marking a **nine-month low.**
• US Copper Production Trends: Domestic copper production in the US fell by **3% in 2024** and **11% in 2023**, worsening supply-side constraints.
• Global Inventory Shifts: The rush to move copper into the US ahead of potential tariffs is depleting inventories in other regions, pushing up prices worldwide.

These supply-side challenges provide strong support for continued bullish momentum in copper markets.

Electrification and Stimulus Support Robust Copper Demand

Despite concerns over slower US economic growth, copper demand remains strong globally. Factors fueling this demand include:

• Global Electrification Efforts: The transition to renewable energy and increased electric vehicle (EV) production continue to drive long-term copper demand.
• Chinese Economic Stimulus: China has implemented stimulus measures to boost industrial activity, keeping copper consumption steady.
• Weaker US Dollar: The **US dollar index** is hovering around **103.6**, making copper cheaper for international buyers and further supporting price gains.

In China, although copper supply remains ample, businesses are adjusting to high prices. Copper cathode rod enterprises have faced operating difficulties due to rising costs, but industry sentiment remains optimistic as the peak consumption season approaches.

Market Dynamics and Copper Price Movements

Copper prices have surged in recent weeks amid tightening market conditions. Key developments include:

• COMEX Copper Prices: Copper futures have climbed above **$4.9 per pound**, marking a nine-month high.
• London Metal Exchange (LME): LME copper prices recorded a **3.4% weekly gain**, reaching **$9,676.5 per tonne** as of March 7.
• Tariff-Driven Price Pressures: Expectations of US tariffs are fueling concerns over domestic smelting capacity, adding further upward pressure on prices.

As long as supply constraints persist, copper prices are expected to remain elevated.

Outlook: Strong Fundamentals to Support Continued Price Growth

Market analysts remain bullish on copper. **Morgan Stanley** maintains a positive outlook, citing tightening inventories and strong demand fundamentals.

• Goldman Sachs Forecast: The bank projects a **global copper market deficit of 180,000 tons in 2025** due to continued electrification demand and slower mine supply growth.
• Long-Term Demand Trends: Electrification and infrastructure investments will likely keep copper consumption high through the second half of the year.

While potential US tariffs could introduce uncertainties in demand forecasts, physical market constraints are expected to support continued price increases.