Copper futures surged above $4.49 per pound on Friday, reaching four-month highs, as concerns about tightening supply from Chile, the world’s largest copper producer, took center stage.
Copper rallies on supply concerns
Copper prices were further bolstered by Chile's forecast of rising demand for copper, particularly driven by the global shift toward renewable energy and the expansion of electrical networks. These factors significantly contributed to the upward pressure on prices, as copper is a key component in renewable energy technologies such as solar panels, wind turbines, and electric vehicles.
Cochilco's cautionary note
Chile’s copper commission, Cochilco, however, issued a cautionary note, warning that geopolitical tensions and potential US tariffs could introduce risks that might negatively impact the copper market. Trade uncertainties, especially between the US and major copper producers, could disrupt global supply chains, affecting the flow of copper and potentially leading to price volatility. Despite these concerns, the overall sentiment remained positive, as tightening supply and strong demand fundamentals continued to support higher prices.
Support from a weakening US dollar
The copper market also found additional support from a weakening US dollar, which helped to make the commodity more attractive to buyers holding other currencies. The dollar’s depreciation was partly driven by easing concerns over a potential global trade war, as US President Donald Trump and Chinese President Xi Jinping are expected to discuss trade issues in an upcoming call. The meeting raised hopes that further escalation of trade tensions could be avoided, and that existing tariffs might be reversed, which would provide a boost to global trade and economic stability.
As copper continues to play a critical role in the transition to clean energy, the market’s outlook remains positive. However, the risks posed by geopolitical tensions, potential tariff changes, and broader economic factors will remain key considerations for investors and traders looking to navigate the volatile copper market in the coming months.
