Analysts warn that proposed U.S. tariffs on copper imports could have severe repercussions for the domestic industrial sector, leading to increased costs and a slowdown in industrial activity. President Donald Trump initiated a probe into these tariffs, claiming they are essential for revitalizing U.S. copper production.
Key Highlights:
Impact on Prices:
Following the announcement, U.S. copper prices surged on the COMEX exchange. The premium for copper prices on COMEX over the London Metal Exchange (LME) jumped to $816 per metric ton, up from $580 the previous day, although it remains below the record peak of $1,153 reached on February 13.
Dependence on Imports:
The U.S. imports nearly 50% of its copper requirements, primarily from Chile, Canada, and Mexico. Since 2021, U.S. copper mine output has declined by 11%, as miners face challenges in expanding existing operations and launching new projects.
Challenges in Domestic Production:
Experts, including Ole Hansen, head of commodity strategy at Saxo Bank, express skepticism about the feasibility of quickly boosting domestic production and refining capacity. “The U.S. has no chance of beefing up their own production and refining capacity anytime soon, so this looks like another own goal,” Hansen noted.
Limited Smelting Capacity:
The U.S. currently has only two operational copper smelters. Asarco, owned by Grupo Mexico, announced plans to restart a mothballed smelter in May last year, but there have been no updates since. Constructing new smelters would take over two years, with new mine developments facing even longer timelines due to permitting challenges.
Regulatory Hurdles:
The Resolution Copper project, a significant development by Rio Tinto and BHP in Arizona, is currently stalled due to opposition from Native American groups, highlighting the complexities of bringing new mining projects online.
Shift in Industry Practices:
Analysts predict that sustained high copper prices could lead industries to pivot towards alternatives like aluminum, potentially dampening overall consumption.