Copper futures sank to $4.60 per pound on Wednesday, retreating from four-week highs of $4.90 touched earlier in the week, as escalating trade tensions and weak macroeconomic data weighed on global manufacturing sentiment.
Copper plunges from recent peaks
The downturn was driven in large part by mounting concerns that aggressive tariff actions by the United States are beginning to significantly impair industrial demand, particularly in key export-driven economies. Notably, China's official manufacturing PMI unexpectedly fell to a 16-month low in April, with new export orders recording their steepest decline since 2022. The drop underscored the impact of the Trump administration's latest tariff escalation, which raised duties on a wide range of Chinese goods to as high as 245%, prompting U.S. firms to reassess supply chain exposure and curtail purchases.
For Chinese manufacturers and copper smelters—already grappling with tepid domestic demand—exports had provided a crucial lifeline. The sudden collapse in foreign orders threatens to deepen excess capacity issues and force production cuts, with potentially cascading effects on raw material imports and global copper flows. These developments also highlight the increasingly bifurcated nature of the global copper market, where weakening demand fundamentals in Asia and Europe contrast with emerging supply-side constraints in North America.
Concerns over potential disruptions in US
While softening demand exerted downward pressure on prices, the downside was partially limited by renewed concerns over potential disruptions in U.S. copper supply. President Trump’s announcement of a probe into copper imports raised the possibility of new tariffs on inbound refined copper and concentrate, which could further strain domestic smelting capacity—already insufficient to meet internal demand. The move triggered concerns of tighter supply conditions in the U.S. and reinforced regional price dislocations.
As a result, the premium of U.S. copper futures relative to equivalent London Metal Exchange (LME) contracts widened again, reversing part of the sharp compression seen earlier in April. The divergence reflected not only potential tariff distortions but also speculative positioning, as traders hedged against supply shocks in North America. The growing arbitrage opportunity has also led to a renewed pickup in volatility across copper spreads, fueling uncertainty over the short-term direction of benchmark prices.
Looking ahead, market participants remain cautious, balancing deteriorating global demand indicators with an increasingly fragmented supply landscape. Attention will now turn to upcoming trade policy announcements and any guidance from major smelters and miners regarding output adjustments, which could further influence price trajectories and inventories in the months to come.
