U.S. traders anticipate substantial financial setbacks due to Trump's withdrawal of plans for copper tariffs.
In a surprising turn of events, US President Donald Trump's decision to exclude refined copper from new import tariffs has led to a significant shift in the copper market. The exclusion helped avoid even higher price shocks by preserving supply chains reliant on refined copper imports.
The tariffs on copper semi-finished goods, announced by Trump, caused a spike in US copper prices, hitting an all-time high of $5.70 per pound. However, the exclusion of refined copper imports helped limit more severe supply disruptions and price hikes.
The US produces about 1.2 million metric tons of mined copper annually but has only about half that smelting capacity domestically. This means much mined copper is shipped abroad for processing. By excluding refined copper from tariffs, the policy ensured continued availability of processed copper to US industries.
The most-traded copper contract on the Shanghai Futures Exchange eased 1.3 per cent to 78,040 yuan a ton, while benchmark three-month copper on the London Metal Exchange (LME) was down 0.7 per cent at $9,631 a ton. The slide in Comex prices flipped its premium over LME to a $4 discount on Thursday.
This move could be a 'disaster' for some traders, according to Dan Smith, managing director at Commodity Market Analytics. However, Nikos Tzabouras, senior market analyst at Tradu.com, mentioned that the non-ferrous metal continues to benefit from structural demand drivers. These demand drivers are linked to its usage in semiconductors powering the AI boom, clean energy infrastructure, and military applications amid rising defense budgets.
London-listed miners Antofagasta, Rio Tinto, Glencore, and Anglo American fell by 4.2 to 6.4 per cent each, reflecting the global impact of the US tariff decision. US-traded copper prices tumbled by more than 22 per cent to $4.355/lb by early afternoon on Thursday, following Steve Clayton, head of equity funds at Hargreaves Lansdown's statement that the sudden realization that there was no need for the market to be so dislocated sent US copper prices tumbling back down toward the London benchmark.
It's worth noting that copper cathodes, high-purity plates of copper used for manufacturing wire, cables, and other components, are traded on international metal exchanges.
[References] 1. The Wall Street Journal 2. Reuters 3. Bloomberg 4. Investopedia 5. US International Trade Commission
Investors in the copper industry may find the recent policy change by President Trump, excluding refined copper from new import tariffs, advantageous, as it ensures continued availability of processed copper to US businesses in the finance sector. The exclusion of refined copper from tariffs could potentially limit fluctuations in copper prices, providing a more stable trading environment for traders dealing in copper cathodes, a key component in various business applications.
