On July 14 (Monday), copper prices have risen by 12% since last Tuesday. Meanwhile, copper inventories have decreased by 1.5% over the same period. What exactly is happening?
Actually, this is a familiar story. Back in February this year, the gold market experienced the same thing.
Due to expectations of tariffs on gold, gold prices in London and New York began to diverge. Traders could have made huge profits by flying gold across the Atlantic. If they got the gold first, that was indeed the case.
However, neither gold traders nor even the Bank of England could meet the demand. This sparked various conspiracy theories.
But copper is not as suitable for such creative stories. People are confused about what is happening, let alone profit from it.
**What does Trump want to do?**
The US relies on imports for half of its refined copper, with 90% coming from other parts of the Americas, mainly Chile. Most of the copper produced in the US comes from Arizona, where the development of a large new copper mine has stalled.
If Trump transfers a significant amount of manufacturing and industry back to the US, the country will need more copper. But if he just wants to rely more on Chilean copper, then it makes no sense to reduce the US's dependence on overseas manufacturing.
So, how can the US economy be revitalized without increasing dependence on imports?
"After receiving a strong national security assessment, I announce a 50% tariff on copper, effective from August 1, 2025," Trump wrote. The basic idea is to hope for more copper supply from domestic sources.
This has sparked various critical voices. "You can't move copper mines to the US," many critics said. "The US has no copper refineries, even if it has its own copper supply. In any case, copper ore has to be shipped to China, and then refined copper shipped back to the US."
For anyone willing to observe, the logic behind Trump's tariffs on copper is obvious. Trump doesn't want to move copper mines to the US, but hopes to build more new factories. The same goes for refineries, which is why he is trying to lower energy prices.
However, he must create economic incentives for investors to do all this. His tariffs do exactly that.
**Diverging Copper Price Trends**
Copper prices on COMEX, LME, and the Shanghai Futures Exchange have shown different trends. Since Trump announced tariffs on imported copper, US copper prices have surged by 15%. However, in the UK and Chinese markets, copper prices actually fell.
The significant increase in US copper prices reflects that once tariff policies take effect, copper within the US will be more valuable than copper outside the US. This is because it does not need to pay a 50% tariff to cross the US border.
Expectations of this situation have driven US copper prices to soar. Companies are building up inventories to avoid future tariffs.
Just as gold dealers airlifted gold bars across the Atlantic a few months ago, the same thing is happening in the copper industry now. Although airlifting copper is not very economical, shipping by sea might be feasible.
**What does this mean for future copper prices?**
During the tariff dispute earlier this year, gold prices surged. However, in the first few months of this year, its performance lagged behind other asset classes.
It cannot be concluded that Trump's recent tariff threats will definitely be beneficial to copper prices, as there are many other factors at play.
His tariff policies focus on producing more copper domestically in the US. This should be detrimental to prices outside the US.
However, the response in copper ore supply will not be so swift. Therefore, compared to gold, I believe copper prices will be driven by completely different fundamental factors in the coming months.
(Wenhua Comprehensive)
