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Copper market navigates tariff uncertainty amid tight global supply
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Key points:
- Copper prices remain rangebound as markets await a US decision on potential tariffs which has already disrupted global trade, triggering a sustained drop in non-US stockpiles, especially in China where demand remains strong.
- Concerns are rising that a build-up of copper stockpiles in the US ahead of the tariffs will leave the rest of the world undersupplied of this key transition metals amid rising demand for power and its main conductor.
- The market is expected to stay supported despite trade war related growth concerns, with downside risks being countered by supply constraints and firm demand.
The copper market continues to trade within a wide range, with some of the price action being driven by market participants trying to preempt what tariff level, if any, the US Commerce Department eventually will recommend the Trump administration apply on US imports. Just like steel and aluminium, Trump has threatened to impose a 25% duty on all copper imports—a move that could roil the global market for one of the world’s most important metals—not least considering a robust demand outlook, recently further enhanced by an energy transition which is expected to increase demand for a key conductor of power towards EVs, AI-related data centres, and cooling as parts of the world continue to get warmer. The spread is currently coming down amid strong demand in China, reflected by an ongoing slump in stockpiles monitored by the Shanghai Futures Exchange and the highest premium for imported copper since December 2023. Overall, an ongoing decline in copper stocks monitored by the futures exchanges in London and Shanghai has only been partly offset by a rise in New York, albeit stockpiles there has risen to a six-year high driven by hoarding ahead of the mentioned tariff announcement. China has seen the biggest reduction during the past ten weeks, with SHFE-monitored stockpiles down 67% to just 89 kt.
The tariffs, designed to protect local producers and foster increased US production and refining capacity, would, however, leave US manufacturers paying much more for their metal than rivals overseas. The probe launched in February under Section 232 of the Trade Expansion Act is now expected to be ready within weeks, well ahead of the 270-day deadline, and the eventual announcement is very likely to trigger a major price adjustment in the market—not least in the spread between London and New York copper—which reflects the market's attempt to guess the eventual tariff level. Following a slump in early April to 6%, the spread has been hovering around 15% before declining to a current level around 8.5%.
The market worries that the current flow of copper heading towards the US ahead of the tariff announcement will be left stranded there until consumed, thereby exacerbating an already tight global market into the second half of 2025. By Q3 2025, Goldman Sachs estimates 45-60% of global reported copper inventories could be in the US, which accounts for just 6% of global refined demand—leaving the rest of the world with very low stocks of this important transition metal.
This tightness, albeit a function of trade dislocation, may in the coming months discourage new short positions driven by trade war-related growth worries from entering the market, thereby limiting the downside to the copper price through 2025.
The high-grade copper future has settled into a wide range, with USD 4 per pound having proved to offer support on numerous occasions, while the latest upside spike was mostly related to the tariff probe briefly driving the HG premium over London above 16%. In the short term, the London Metal Exchange (LME) contract offers a better insight into the global supply and demand outlook, which, according to Zijin Mining Investment Shanghai, a unit of China’s top copper miner, is currently being underpinned by the mentioned strength in China, where apparent demand growth is running near double-digit levels this year, driven by strong orders from State Grid Corp, the world’s single largest buyer of copper, and rising production of copper-intensive goods such as air-conditioning units to electric vehicles. Key takeaways from recent company earnings update
Copper producers are leaning into the structural tightness expected to emerge once the current surplus dissipates. 2025 guidance across the peer group points to mid-single-digit production growth and broadly stable unit costs, while almost every management team is accelerating de-bottlenecking or brownfield expansions rather than green-field megaprojects. Shareholder returns remain healthy, but CAPEX is inching higher as electrification-driven demand (AI data-centres, grid revamps, EVs) keeps long-cycle price expectations firm at or above USD 4 per pound. Political risk (U.S. tariff probe, Chile/Peru permitting), power availability and water stress are the main swing factors for 2026-28. With the supply wave cresting and demand accelerants such as AI/data-centre electrification piling on, copper-centric miners with shovel-ready brownfield growth and robust cost positions look well placed for the next leg higher.
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