Copper futures in the US rose above $4.4 per pound on Friday, extending their rebound since hitting three-month lows of $4.05 earlier in the week, as markets assessed the delicate balance between supply concerns and risks of lower manufacturing demand amid the wave of tariffs imposed by President Trump.
Copper extends rebound from three-month low
The President's decision to temporarily lower the reciprocal tariff package for non-retaliating countries for the next 90 days provided a brief respite, triggering a rebound for base metals like copper, as it helped alleviate some of the supply chain damage to factories and curbed fears of a more severe contraction in industrial output. This temporary easing lifted copper prices as market participants hoped that the damage to global supply chains would be contained at a smaller magnitude.
However, despite the short-term recovery, copper futures remained 20% down from their record high of $5.3 per pound, which was touched on March 26th. The ongoing uncertainty surrounding trade relations, especially as President Trump signaled his intention to impose tariffs specifically targeted at copper in the coming weeks, has kept market participants cautious. The threat of further tariffs on copper has contributed to a widening premium for US copper futures relative to comparable contracts in the London Metal Exchange (LME). This price discrepancy is due to the strain that potential trade barriers would place on the limited US copper smelting capacity, as the US struggles to keep up with demand for copper in the face of a disrupted global supply chain.
Trade war hits the copper market
In addition to the tariffs, the escalation of the trade war with China—marked by higher tariffs from both parties—has further pressured the steady flow of copper scrap from the US to China, a key importer of copper. The disruption of this flow adds another layer of uncertainty to the copper market, as China plays a pivotal role in both the demand for copper and the recycling of copper scrap. As these trade barriers begin to tighten, there are concerns that the global copper market could face shortages or higher prices, as the US struggles to meet domestic demand without access to Chinese markets. The ongoing trade tensions, coupled with supply chain disruptions and tariff threats, are likely to continue creating volatility in copper prices, keeping investors on edge about the metal's near-term outlook.
