President Trump announced plans to implement a 50% copper import tariff, with Commerce Secretary Lutnick saying this could be in place by later in July or 1-Aug i.e. very soon. This is not new news however the timeframe has now been set, and it’s a short one. US Copper prices have been trading at a material premium to other areas. As a result, Copper was being bought and shipped to the US to make money on the difference. The demand for Copper from US buyers was high, as they stockpiled ahead of these looming tariffs,. The overnight move and sharpening up of time frames mean the window on this trade could now be closed. All things being equal, Copper outside the US should be 50% cheaper given the tariff, but things in financial market are rarely all equal!
- The US has been building up inventories in recent months, supporting copper prices, while traders have been playing the arb between the LME (UK) and Comex (US), further supporting demand and prices. What played out overnight has the risk of cooling the market on both sides of the Atlantic.
When many thought Copper stocks would rally today after prices on Comex spiked ~17% at one point, the biggest move since the 1980’s, before settling up ~9%, Sandfire (SFR) was down 10% early before finishing down 3.45% in a volatile session, with other Copper shares equally volatile, Capstone Copper (CSC) -3.03% & Evolution (EVN) -7.02%, though there were a few mitigating factors which hurt the latter (GS downgrade to sell).
On the other hand, US based Freeport McMoRan (FCX US) – a stock we own in the International Equities Portfolio was up 9% at the highs, before finishing up +2.5%. The moves here and overseas show an initial knee jerk reaction, but sanity has largely prevailed. Expect more volatility in Copper in the short term, however, we remain comfortable with the medium terms picture for the industrial metal.
MM remains bullish on Copper
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