Could copper lose its tariff premium?
At a Glance
Current market dynamics suggest copper prices may be vulnerable as tariff premiums come under scrutiny. Per the full note from ING, expectations of US import tariffs have driven copper prices near historical highs, with a notable surge in monthly imports and declines in available inventory. However, any disappointment regarding new policy decisions could lead to sharp corrections in these prices. As traders speculate on tariffs, totals exceeded 200,000 tonnes in July, the highest monthly imports in 12 years, highlighting the volatility stemming from both quantitative flows and geopolitical considerations.
Key Takeaways
- 01Copper prices are currently inflated due to speculative tariff expectations.
- 02US copper imports in July reached over 200,000 tonnes, a 12-year high, indicating strong market demand.
- 03Current tightness in physical inventories may sustain upward pricing pressure unless tariffs disappoint.
- 04Backtrading in the copper markets, reflected in widening spreads, suggests increasing market volatility.
Full Analysis
What the desk is arguing
The desk believes that copper prices are currently inflated due to tariff expectations, making them susceptible to a significant correction. Recent increases in US imports, combined with tightening physical market conditions, signal potential risks for ongoing price support. Per the full note from ING, copper trades above $14,000/t, yet any unfavorable policy announcements could challenge this tariff premium.
As evident from the data, monthly US copper imports soared to over 200,000 tonnes in July, reaching a 12-year high. The physical markets are under pressure, evidenced by diminishing LME inventory levels, which fell to a five-month low, contributing to deeper backwardation in the cash-to-three-month spread, signaling tighter short-term supplies. These factors bring significant volatility into the copper market.
Where it sits in our coverage
- JPMorgan has a target of $1.10 for December 2026.
- BofA is at a more conservative $1.04 for the same timeframe.
This view aligns with the consensus as it occupies the upper range of the market's expectations, emphasizing robust conditions unless tariffs are implemented unfavorably. Particularly, the BofA stance contrasts with our outlook on the sustainability of copper imports and pricing.
How other firms see it
Several firms are aligned in their outlooks on copper pricing, particularly supporting the idea of price resilience amidst current tariff expectations. Notably, JPMorgan has maintained a bullish stance in light of supply dynamics.
In contrast, BofA represents a more cautious view, prioritizing potential headwinds from tariff implementations or shifts in market sentiment. Traders should also monitor the USD/CAD trajectory, as fluctuations in copper prices often correlate with broader FX impacts and commodity-driven movements in currency pairs.
Market Implications
Copper prices are at a critical juncture; watch closely for changes in trade flows following any US tariff announcements or policy shifts. The immediate range of $14,000/t will be pivotal, and a break below this level could trigger significant downward adjustments.
From the original
Articles Could copper lose its tariff premium? Published 13:40 Commodities, Food & Agri Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Copper has rallied sharply on expectations of US import tariffs, as traders rush metal into the US and physical mar
Related speeches
4 itemsWhat’s next for US copper import tariffs
The upcoming US decision on copper import tariffs is poised to significantly affect the copper market, with the Commerce Secretary's recommendation expected by June 30. Per the full note from ing-think, the market has already reacted, reflected in the widening COMEX-LME spread, which now stands at approximately $400 per ton, indicating substantial tariff risk pricing. The positioning around copper is currently robust due to factors like tight supply chains and heightened demand driven by AI technology, supporting copper's resiliency despite broader economic pressures. Traders should remain attuned to copper price movements, particularly as they align with macroeconomic indicators and geopolitical tensions.
Global Commodities: Tariff shockwaves churn crude and copper markets
The desk interprets the latest developments in global tariffs and trade negotiations as pivotal factors impacting crude and copper markets, potentially affecting currencies dependent on these commodities. Per the full note from J.P. Morgan, the Trump administration’s warnings regarding penalties for countries like India and China over Russian oil purchases signal heightened tensions in commodity pricing structures. Additionally, the exemption of refined copper cathode from Section 232 duties has introduced unexpected volatility in the copper market, suggesting further price instability ahead as negotiations evolve. As the landscape shifts, traders should closely monitor these developments for signs of broader currency movement, particularly in commodities-sensitive pairs.