Strong global demand and a tight supply of copper has raised the price of the metal to record highs this year, and a threat from U.S. President Donald Trump to impose new copper import tariffs will only send prices higher, an expert says.
“Copper has been seeing a huge tailwind this year,” Ken Hoffman, commodity strategist at Red Cloud Securities, told BNN Bloomberg in an interview Tuesday afternoon.
“You have every military in the world trying to increase budgets, there’s lots of copper in military hardware. Put on top of that the electrification of everything, there’s huge copper needs there… and you’ve just added gas to the fire saying we’re going to put these silly tariffs on copper.”
Earlier Tuesday, Trump said he plans to impose a 50 per cent tariff on copper entering the U.S., but did not specify when the levy will take effect.
Hoffman said U.S. companies will be left paying more for copper if new tariffs are placed on the metal, and the increased cost is exacerbated by a declining U.S. dollar.
“If I’m an automaker in the U.S. and I need copper tubing or if I’m a utility in the U.S. putting up copper wire, I’m definitely going to be paying those U.S. prices. And so, those surcharges will be put on to the U.S. market, the rest of the world will not pay that,” he said.
“In addition to that, you have the U.S. dollar, which is down about 15 per cent this year… so all metals which are priced in U.S. dollars are seeing this huge boost by dollar destruction.”
‘A lot of uncertainty’
For companies that produce copper as well as those that purchase it, Trump’s comments have caused “a lot of uncertainty,” a metal market watcher told BNN Bloomberg Wednesday morning.
“I’ve talked to a number of copper traders as well as copper-producing companies over the last 12 hours or so, and nobody really seems to know what’s happening at this point in time,” said Dalton Baretto, managing director of equity research for metals and mining at Canaccord Genuity.
“Let’s assume the U.S. does put in this 50 per cent tariff… obviously this is negative for any consumer of copper in the country. What this is also going to do is put in a sustained premium over the LME (London Metal Exchange), the global benchmark price, for any copper that’s in the U.S.”
Baretto said new copper tariffs would cause a rebalancing of metal flows away from the U.S. but noted that companies with American copper mines could benefit down the line.
Copper production in the U.S. is largely dominated by American metals firm Freeport-McMoRan, Baretto said, however Canadian miners like Vancouver-based Taseko Mines and Toronto-based Hudbay Minerals are looking to enter the U.S. copper production space in the coming years.
