Copper chaos won’t be as profitable as February’s | Australian Markets

The copper price is up 12% since Tuesday. Copper stocks are down 1.5% over the identical timeframe. What offers? Or, on this case, taketh away…

Actually, it’s a acquainted story. Back in February, it was the gold market that skilled the identical factor.

Anticipating tariffs on gold, the price between London and New York started to diverge. Traders may make whopping features actually flying gold throughout the Atlantic. If they might get their fingers on it within the first place, that’s.

But gold sellers, and even the Bank of England, couldn’t keep up with demand. This triggered all kinds of conspiracy theories.

Copper doesn’t fairly lend itself to the identical kinds of inventive narratives. And but, there’s a lot of confusion about what’s occurring. Not to say how best to revenue from it. So, let’s take a nearer look…

What is Trump up to?

The US imports half of its refined copper. 90% of that from the remainder of the Americas – principally Chile. Of the copper produced within the US, most comes from Arizona, the place a big new copper mine development has stalled.

Presumably, if Trump goes to onshore a lot of manufacturing and industry, the US will need a lot more copper. But there’s no level making the US much less depending on international manufacturing when you simply make it more depending on Chilean copper as an alternative.

So, how do you revive the US economic system with out growing import dependency?

“I am announcing a 50% TARIFF on Copper, effective August 1, 2025, after receiving a robust NATIONAL SECURITY ASSESSMENT,” Trump wrote. The fundamental concept is that he needs more copper provide to come back from inside the US.

This triggered all kinds of hilarious criticism. “You can’t move a copper mine to the US,” stated many a critic. “The US doesn’t have copper refineries even if it did supply its own copper. It’d have to ship copper ore to China and refined goods back again anyway.”

It all jogs my memory of the criticism Trump copped when he tariffed penguin colonies in April. Eventually, somebody checked the trade steadiness of the penguin colonies in query. And found they manufacture a vital quantity of machinery…

What Trump was actually doing is stopping tariff dodging. We know tons of closely tariffed international locations assemble their items in Canada and Mexico to flee the high tariffs. Well, some use penguin colonies on their paperwork for a similar impact!

With Trump’s copper tariffs, the logic is simply as apparent for anybody prepared to look. Trump doesn’t wish to transfer copper mines to the US. He needs corporations to construct tons of new ones. The similar for refineries – that’s why he’s making an attempt to get power costs down too.

But he has to create the financial incentives for buyers to do all this. And his tariffs just do that.

Copper price divergence

You may suppose there’s just one international price for copper. But you’d be mistaken. There are a number of main copper trading contracts. The New York and Chicago COMEX, London’s LME and the newer Shanghai contract. The costs are usually not the identical.

The US copper price surged 15% on Trump’s announcement of 50% tariffs beginning 1 August. But the copper price truly fell within the UK and China. That’s why most ASX copper stocks didn’t budge.

In reality, US copper stocks barely bounced themselves. That’s as a result of they principally have operations exterior the US too.

The copper price spike displays that, as soon as the tariffs arrive, copper inside the US will be more useful than copper exterior the US. That’s as a result of it won’t should pay a 50% tariff to cross the US border.

Buying in anticipation of that is what spiked the US copper price. Companies are building up stockpiles to dodge future tariffs.

Just as gold merchants have been flying bars throughout the Atlantic months in the past, the identical is going on to copper now. Although flying is unlikely economical for copper, transport doubtless is.

What does this imply for copper sooner or later?

The gold price soared during the tariff controversy earlier this 12 months. It left behind different asset lessons for the primary few months of 2025.

It’s natural to presume some kind of causation, not simply correlation. But I’m not sure that tariffs have been behind gold’s outperformance.

The correlation between the gold price and the unfold between London and New York costs isn’t sturdy. The gold price surge continued long after costs converged.

And so I don’t suppose we are able to conclude that Trump’s latest tariff tantrum is essentially bullish for copper. There are too many different components occurring.

So, what does the tariff imply for copper buyers?

The level of Trump’s copper tariff coverage is to provide more copper inside the US. That ought to be unhealthy for the price exterior the US. If it really works…

But it’s not like copper mine provide responds terribly shortly. So, as for the price of gold, I think copper’s price will be pushed by completely totally different fundamentals in coming months.

To discover out what they’re, take a look at this presentation from our mining analyst James Cooper.

If you wish to know how you ought to be cashing in on Trump’s latest tariffs, click on right here.

The first half of the strategy is to invest within the Aussie corporations which are already up and working inside the US. This places them past the firewall of US tariffs.

The different option is to invest within the stocks that Trump favours as half of his tariff strategy. You’ll discover out what they’re right here.

Nick Hubble,
Editor, Strategic Intelligence Australia

All advice is basic advice and has not taken under consideration your personal circumstances.

Please search impartial financial advice concerning your own state of affairs, or if unsure concerning the suitability of an investment.