If the US implements tariff measures on copper, Freeport-McMoRan could see an annual profit increase of $1.6 billion, a benefit derived from its status as the largest copper producer in the US and its greater expansion options compared to competitors.
Freeport accounts for 60% of US copper production and has been developing US mine projects with decades of growth potential since the 19th century without needing to reapply for permits. Other companies are struggling due to the harsh realities of the US mining industry: it takes years to build a mine in the US.
According to Xinhua News Agency, US President Trump stated on the 8th that a new 50% tariff would be imposed on all copper imported into the US.
Tuesday's preliminary announcement drove Freeport's stock price up by 5%, raising questions about where the US will source its copper, given the long-term obstacles to building mines and smelters and the scarcity of alternatives beyond Freeport's seven US copper mines.
Chris LaFemina, an analyst at Jefferies, said, "The government's long-term goal may be to make the US entirely self-sufficient in copper, but the long development cycle for mines makes achieving this goal within 10 years nearly impossible."
Currently, the US relies on imports for about half of its copper demand, with major source countries including Chile, Canada, and Peru.
Jefferies specifically notes that Freeport is the company expected to benefit the most from US tariffs. As the controller of four of the five largest copper mines in the US, Freeport sells all its US-produced copper domestically, a higher proportion than any other company.
In April this year, Freeport estimated that if copper tariffs took effect, it would see an annual profit increase of at least $800 million due to price increases.
The April estimate was based on a US copper price of $4.84 per pound, about 60¢/lb higher than the benchmark London Metal Exchange (LME) copper price. This premium has now doubled, translating to an additional approximately $1.6 billion in annual earnings before interest, taxes, depreciation, and amortization (EBITDA) for Freeport. The company's 2024 EBITDA was $10 billion.
*Surge in Imports*
According to data from the U.S. Geological Survey (USGS), US refined copper imports have increased more than sixfold since 2014, despite a mere 20% decline in production over the same period. The country currently has nearly 30 years of copper supply within its borders.
As mines age, they must be expanded or replaced. However, mines are highly unpopular in most parts of the US, leading to delays in regulatory decisions. A 2024 study by S&P Global shows that it takes nearly 29 years on average to build a mine in the US, the second-longest construction cycle globally after Zambia.
Unlike furniture or other consumer goods factories, which can be built within a year or two, mines require geological exploration, and the permitting process can take over a decade, sometimes facing opposition from indigenous peoples or environmental protection inspection teams.
US copper mine projects proposed by companies such as BHP, Rio Tinto, Northern Dynasty Minerals, and Antofagasta have been delayed for over a decade.
The US has only three copper smelters for processing metal to make wires and pipes, with one of them having been out of operation since 2019. In 1995, the US had seven copper smelters.
In March this year, Kathleen Quirk, CEO of Freeport, said that any tariffs could affect the global economy.
Freeport plans to extract copper from waste rock previously considered worthless at its US mines. By 2027, the extraction could increase Freeport's US copper production by 800 million pounds per year.
The company's mines, such as Bagdad and Morenci in Arizona, still have room for growth. Freeport said in March that it might expand its US smelters.
In Utah, Rio Tinto operates the Kennecott Copper Mine, the world's deepest open-pit mine, and is undergoing a major expansion. Rio Tinto is also trying to develop its Resolution Copper project in Arizona but faces opposition from indigenous peoples. Rio Tinto said that it has a "strong intention to increase investment in the US copper mining sector and sees significant opportunities to expand operations in the US."
KGHM, Lundin, and Grupo Mexico are all relatively small copper producers in the US.
(Wenhua Comprehensive)
