U.S. President Donald Trump’s 50% tariff on copper imports starting Aug. 1 has thrust the metal into the spotlight. U.S. Comex futures rose 2.65% on Thursday following the announcement and remained elevated, even as they pared earlier gains on Friday. The prices of copper in the U.S. surged 13% in its Wednesday session, which marked its best one-day gain since 1989 when Trump first announced the duties on copper imports. @HG.1 1Y mountain copper prices Meanwhile, the three-month benchmark copper futures on the London Metal Exchange were down over the last two days after the announcement, before recovering 0.73% to $9,700.50 per tonne as of 12:55 p.m. Singapore time Friday. The widening premium between the price of copper in the U.S. and the rest of the world comes as buyers stateside scrambled to front-load imports in anticipation of the tariffs, artificially inflating prices in the U.S. Nearly half of the copper used in the U.S. is imported, data from the U.S. Geological Survey showed. Analysts at Macquarie estimate that copper imports totaled 881 metric tons in the first half of the year, compared to an underlying requirement of around 441 metric tons, based on actual trade data for the January to May period and shipment data logs for June. “This implies a 440,000 tons excess inventory build, comprised of 107,000 tons in visible Comex stocks and 333,000 tons in unreported inventory and/or pull-forward of purchases through the industrial chain,” they wrote in a Wednesday note. The U.S.’ copper imports have rarely fallen below 36,000 tons a month, the analysts noted. The country has an underlying import demand of around 74,000 tons, implying that it has approximately nine months to “work down excess stocks,” they added. Copper is a key input in products such as semiconductors, aircraft, data centers, lithium-ion batteries and electric vehicles. In a post on Truth Social on Wednesday, Trump noted that the metal is the “second most used material by the Department of Defense.” The superpower’s reliance on copper imports is a “vulnerability, but [the U.S. doesn’t] have the capacity right now to offset imports,” Carlos Miguel Gutierrez, the former U.S. Secretary of Commerce under President George W. Bush, told CNBC’s “The China Connection” on Thursday. He expects some shortage of copper in the U.S. as well as an increase in prices as companies start investing in production capacity. Sabrin Chowdhury, head of commodities research at BMI, said that the U.S. would need at least 20 to 30 years to build significant copper production capacity. “It takes 10 years just to explore for copper,” she said on Friday. Looking ahead, analysts at Citi Investment Research expect a pullback in the price of the metal outside the U.S. to $8,800 per ton within the next three months. Additionally, they foresee that the Comex-LME arbitrage — or the price differential in the price of copper in the U.S. and elsewhere — will be heavily discounted at a rate of 50% “given the significant U.S. inventory build in recent months and the likelihood that key copper exporters to the U.S. will be able to negotiate eventual partial exemptions at a lower tariff rate,” they wrote in a Tuesday note. The volatility and price differential between copper in the U.S. and the rest of the world has raised the question of whether to invest in the metal right now. CNBC Pro spoke to two investment managers who have differing opinions. Significant volatility Alonso Munoz, chief investment officer and founding partner at the U.S.-headquartered Hamilton Capital Partners, says he is staying clear of the metal, at least in the short term. “We wouldn’t be buyers of copper or copper stocks in the short run because there is potential for significant volatility,” he said. “The price of copper spiked after Trump spoke about the tariffs to his cabinet, and that gives us some caution that if the administration changes their mind, that could instantly cause prices to retreat,” Munoz noted. For now, he expects prices in the U.S. to stay elevated. While this will benefit U.S. producers through better margins, Munoz cautioned that it will ultimately result in higher prices of products containing copper. Such products include wiring and power delivery networks found in data centers and power grids, as well as motors in electric vehicles. In the long run, he expects prices to hover around $4.90 to $5 per ton, a 13% drop from current prices, amid strong demand for the metal from the green energy transition. “The short-term price spikes of 10-20% doesn’t necessarily mean it would continue. If anything, we would be cautious that any change to the current geopolitical discussions on tariffs and even the supply and demand imbalance and price arbitrage with the rest of the world could actually cause U.S. copper prices to retreat significantly,” Munoz explained. Undervalued asset Will McDonough, CEO of merchant bank Corestone Capital, holds a different view from Munoz. He considers copper an undervalued asset given its strong use cases. “People underappreciate the volume of copper necessary for intermittent battery supplies, like solar and wind, electric vehicles or even the adoption of artificial intelligence and data centers,” he said. The investor, who is bullish on commodities, is investing in copper futures. He believes Trump’s current focus on the metal is the result of a realization that “China and unfriendly foreign powers have hoarded a lot of copper supply.” The jump in copper prices in the U.S., he added, is because the “market is aware that supply is concentrated.” China produced 1,800 metric tons of copper in 2024, according to UN trade and development data. Meanwhile, the Asian giant was the top importer of copper ore and unrefined copper, accounting for roughly 60% of total imports in 2023, compared to just 17% in 2013, separate data from the trade agency showed. Even so, McDonough considers the current price a little high and attributes it to an “overreaction to the tariffs.” While he expects a short-term correction in prices to “high fours or low fives,” he said buying copper at the current $5 per pound range would still be considered “good value” in a few years from now.
