Trump's Potential Copper Tariffs Drive Futures Higher

Copper prices in the United States rose following President Donald Trump's decision to initiate an investigation into potential tariffs on copper imports. A nationwide power outage in Chile, the world's largest copper producer, also added uncertainty to the market.

May copper futures, the most actively traded contract on the US COMEX, increased by 3.8% to US$4.7/lb, after reaching an eight-and-a-half-month high on Feb. 13, 2025.

According to the US Geological Survey, the United States imports nearly half of its copper needs, with Chile, Canada, and Mexico being the main suppliers. Domestic copper mine output has declined by 11% since 2021 due to challenges in expanding existing mines and developing new projects.

The premium of COMEX copper prices over the London Metal Exchange (LME) benchmark rose to US$854/t on Feb. 26, 2025, up from US$580/t the previous day. However, this remains below the US$1,153/t peak recorded on Feb. 13, 2025.

Three-month copper on the LME increased by 1.2% to US$9,511/t. Other base metals also recorded gains, with aluminum rising 0.6% to US$2,653.5/t zinc up 0.6% to US$2,828.50, nickel gaining 0.4% to US$15,400, lead increasing 1.1% to US$2,014, and tin advancing 0.1% to US$32,820.

The market reaction follows Trump's directive on Tuesday to investigate tariffs on copper imports, citing the metal’s strategic importance for electric vehicles (EVs), military hardware, power grids, and consumer goods.

A massive power outage in Chile on Feb. 25, 2025, affected the capital, Santiago, and disrupted electricity supply to major copper mines in the northern region. While copper market fundamentals remain relatively weak due to rising inventories, the blackout has added supply concerns, providing additional support to prices, reports El Economista.

Ole Hansen, Head of Commodity Strategy, Saxo Bank, commented on the situation, stating that the United States is unlikely to increase its copper production and refining capacity in the near term. "The United States has no chance of beefing up their own production and refining capacity anytime soon, so this looks like another own goal," he said.