Copper’s Tightrope: Trade Tariffs, China’s Stimulus, and the Global Demand Shift

• Tariffs do restrict trade flows, US buyers are likely to turn to alternative suppliers like Chile and Peru, while Canada may divert exports to other regions.
• Copper prices steadied near a 9-month low in early 2025 as investors weighed stimulus prospects in China.
• As  demand is shifting to structural growth sectors like AI, energy transition, and emerging market urbanization, copper supply remains constrained by declining ore grades, disruptions and insufficient investment in new mines.

Copper is becoming an increasingly strategic metal, with demand driven by the growth of AI, the energy transition, and urbanization in developing economies. Despite near-term price volatility, the long-term fundamentals for copper remain compelling for investors. Structural supply constraints combined with surging demand from electrification and digitalization are likely to support strong copper prices in the years ahead.

Changing Demand Landscape

Copper's demand profile is evolving. Traditionally seen as an economic bellwether, copper is now more levered to high-growth sectors like artificial intelligence, renewable energy, and the development of emerging economies. According to analysts at Sprott Asset Management,

"Copper was traditionally seen as an economic bellwether but is now more synchronized with structural growth sectors like AI, the energy transition, and the urbanization and industrialization of developing countries."^[1]

The intensive use of copper in data centers and digital infrastructure is creating a new demand driver as AI adoption accelerates. At the same time, copper remains a lynchpin of the energy transition, used heavily in renewables, EVs and power grids. While the Chinese property sector, a historical demand anchor, has slowed, government stimulus focused on copper-intensive green infrastructure is providing an offset.

Persistent Supply Challenges

As demand surges, copper producers are contending with increasing supply-side challenges. Declining ore grades, frequent production disruptions, and long lead times for new projects are constraining the ability of supply to respond.

"The lack of sufficient investment in future copper supply remains a critical bottleneck. Despite strong demand forecasts, the capital intensity and lengthy timelines associated with new mine development have limited the sector's ability to respond."^[1]

These structural constraints are likely to keep the copper market in deficit in the coming years, with the potential for wider deficits if demand growth exceeds expectations. Treatment charges are facing pressure from smelting overcapacity, while the availability of copper concentrate is tightening, factors that could further support prices.

Impact of US Tariffs

The US is a major copper importer and consumer, giving its trade policies an outsized impact on the global market. Recent tariffs proposed by the Trump administration pose a risk, but also a potential opportunity for copper.

While blanket tariffs could dampen demand, targeted tariffs on China may accelerate the relocation of manufacturing to other emerging economies, boosting copper requirements. At the same time, copper's growing strategic importance in the energy transition may provide some insulation. According to ING analyst Ewa Manthey

"[Investors] are waiting to see if and when Chinese support measures will feed their way into metals markets in the form of stronger demand,” said Ewa Manthey, a commodities strategist at ING, said by email. “Trump’s tariffs could also trigger bigger stimulus from China, capping the downside for copper prices this year.”^[2]

If tariffs do restrict trade flows, US buyers are likely to turn to alternative suppliers like Chile and Peru, while Canada may divert exports to other regions. This could cause short-term disruptions and higher premiums, but is unlikely to durably dent demand given copper's critical role.

Building the Copper Portfolio

Kodiak Copper

Kodiak Copper is advancing its MPD copper-gold porphyry project in southern British Columbia towards its inaugural resource estimate in 2025. Recent exploration has outlined a continuous, multi-phase intrusive system with similarities to other productive alkalic porphyry systems in the region. Chairman Chris Taylor noted the likelihood of the project ultimately comprise several pits and several deposits as exploration continues, drawing parallels to the evolution of neighboring mines, while CEO Claudia Tornquist highlighted the potential for the resource estimate and demonstrate the project's overall scale:

That'll give you an idea of what the project economics could be based on those comparables and then you build on it with the continuing exploration program as well. That's what we could deliver to shareholders this year - a re-rating based on the amount of copper we see in the ground right now, and an appreciation for the fact that there are additional zones that we're going to be drilling and there's significant extensions on the zones that we will have resources on initially.

With a current market cap of just C$30M, Kodiak appears undervalued relative to more advanced peers, especially as the resource estimate and ongoing exploration provide potential catalysts to re-rate the stock.

Prismo Metals

Prismo offers speculative appeal through its drill-ready Hot Breccia copper porphyry target in Arizona. CEO Craig Gibson highlighted the project's geological potential and proximity to giant porphyry deposits noting that majors are increasingly focused on finding these deep-seated, large and rich copper deposits in the region. The surrounding property holders - Rio Tinto, BHP, Freeport-McMoRan, Asarco/Grupo Mexico - would all be logical partners if Prismo's drilling successfully proves the Hot Breccia concept.

"It's going to be a big boy game at the end. We want to find the prize and let somebody else develop it."

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Although early-stage, the current 5,000m drill program could quickly demonstrate the potential for a major discovery that would put Prismo on the map for neighboring producers. Gibson emphasized Prismo's ultimate strategy is making the stock a potential call option on exploration success.

Marimaca Copper

Marimaca Copper's recent high-grade discovery at Pampa Medina is a potential game-changer, with CEO Hayden Locke stating it completely changes the complexion of the company's opportunity in Chile. Highlights include 18m at 5% copper within a broader 400m zone at 0.5%, suggesting strong potential to build tonnage. Importantly, Locke sees similarities to Antofagasta's major Cachorro discovery nearby, with Pampa Medina representing a possible new belt of copper mineralization. This fits well with Marimaca's strategy of consolidating a dominant land position in this emerging district, including a recent option on the prospective Madrugador ground.

In 2025, Marimaca will pursue an aggressive two-pronged approach - advancing the flagship Marimaca oxide project while drilling to expand Pampa Medina.

As Locke noted, "Our objective is to try to move everything further forward so that we can bring additional value and additional cash flow forward for our investors."

Despite near-term economic headwinds, Locke remains locked on copper's outlook, driven by the inexorable growth of electrification. With a strengthened balance sheet, experienced team, and two compelling growth avenues, Marimaca appears well-positioned heading into 2025.

Arizona Sonoran

Arizona Sonoran Copper Company achieved several key de-risking milestones in 2024 at its Cactus project in Arizona. The updated PEA outlined a robust 31-year mine life producing 116 ktpa of cathode, with a $2B NPV (8%) and 24% IRR at $3.90/lb copper. Importantly, the PEA incorporated the reclassification of the Parks/Salyer deposit as an open pit, reducing technical risk, after the adjacent Mainspring property acquisition. A major 174,000 ft drill campaign also delivered a 28% increase in leachable measured and indicated resources to 2B lbs at 0.37%. CEO George Ogilvie highlighted these achievements have simplified the American Copper Cathode project, by pulling together a significant open pit operation on private land in Arizona.

In 2025, key workstreams include infill drilling, metallurgical optimization, and ongoing environmental studies.

As Ogilvie summarized, "Looking to 2025, we are well funded through corporate and institutional support, to build on the 2024 PEA while optimizing the Company at the asset level. The key focus will be trade-off studies as part of the 2025 PFS targeted to be delivered in the second half of this year."

Aldebaran Resources

Aldebaran Resources has commenced its 2024-2025 field program at the Altar copper-gold project in Argentina, targeting 25,000m of drilling. The program marks an important shift from resource expansion to feasibility-level work to support a PFS by H2-2026. Key goals include collecting samples for metallurgical testing with partner Nuton, infill drilling to upgrade resources to measured and indicated, as well as geotechnical and hydrological studies.

The upcoming program builds on the last several years of successful exploration at Altar. This will form the basis for an updated PEA in Q2-2025.

CEO John Black highlighted, "We will release an updated mineral resource estimate that will quantify a significant increase in the size of the Altar deposit since the 2021 resource. We feel that de-risking the project through PEA and PFS will add substantial value to an already impressive deposit."

Black emphasized the company's focus on de-risking Altar through economic studies. By steadily advancing Altar up the development curve with a systematic approach, Aldebaran seems to be positioning the project as an increasingly attractive proposition for a major to acquire or joint venture.

Western Copper and Gold

Western offers exposure to its advanced Casino project, one of the largest copper-gold deposits globally, in mining-friendly Yukon. A 2022 Feasibility Study outlined a technically-sound and economically-robust project, headlined by an after-tax NPV of C$2.3B and 18% IRR at conservative metals prices. Chairman Ken Williamson highlighted that Casino is an attractive project throughout the commodity cycle with significant leverage to rising copper prices and capital costs in the middle of the pack on an intensity basis. The study also showcased the critical importance of Casino's 14.8Moz gold resource, which contributes 34% of revenues and strong by-product credits to drive extremely low operating costs.

While permitting and financing remain ahead, recent strategic investments from Rio Tinto and Mitsubishi underscore the project's world-class scale and quality.  With a market cap of just US$243M, Western trades at a deep discount to the NPV and at a lower EV/resource multiple than developer peers, suggesting considerable potential upside as Casino advances.

ATEX Resource

ATEX Resources achieved several milestones in a transformative 2024, headlined by an updated geological interpretation of its Valeriano copper-gold project in Chile. The Phase 4 drill program outlined a larger, higher-grade intrusive system than previously modeled, with grades up to 2% CuEq over significant widths.

The company stated this drilling demonstrated continuity of the higher-grade porphyry mineralization within the broader system while also discovering a shallower breccia zone that could represent the potential for a stand-alone starter mine that would significantly derisk potential project economics. These results are being incorporated into an updated resource estimate in late 2025 which will benefit from outstanding metallurgical recoveries of up to 95% for copper and 97% for gold at a coarse primary grind.

Meanwhile, the ongoing step-out drilling continues to offer discovery potential to further expand the mineralized footprint. With a strengthened balance sheet following a C$55M investment from Agnico Eagle, ATEX is fully financed to deliver this dual-track exploration and development program.

Pan Global Resources

Pan Global is embarking on an aggressive 2025 drill campaign across its Spanish copper projects, headlined by expansion and infill drilling at the La Romana discovery to support a mid-year maiden resource. In parallel, first-ever drilling will test five high-priority targets near La Romana that could demonstrate a large-scale system. CEO Timothy Moody emphasized the compelling growth pipeline the company has built, underpinned by the potential for a significant new copper supply source in mining-friendly Spain.

Against a backdrop of growing copper deficits, Moody believes Pan Global has the potential to put the Company firmly on the radar of larger copper producers seeking new growth projects. With a strong treasury, multiple near-term catalysts and a highly prospective land package, Pan Global is well-positioned to create value in a rising copper price environment.

The Investment Thesis for Copper

• Copper has attractive long-term fundamentals, driven by accelerating demand from AI, clean energy and emerging markets.
• Structural supply constraints from falling ore grades, disruptions and capex discipline are likely to sustain deficits.
• Exposure to copper prices can be gained through mining equities, which offer operational leverage and are generating robust margins.
• Investors can look for quality producers with strong balance sheets, cost positions, and growth potential.
• An allocation to copper can provide portfolio diversification, as well as exposure to the energy transition and growth of the digital economy.

Key Takeaways

The copper market is at an inflection point - the metal is becoming ever more critical to the technologies shaping the future economy, even as supply challenges mount. While near-term volatility is likely, the long-term investment case is robust. Investors can gain exposure through select mining equities, potentially seeing gains driven by copper's growing strategic role. Prudent copper allocations may play an increasingly important role in forward-looking portfolios.

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_References:

1. _{Wong, P., White, J. (January 2025). Sprott. Top 10 Themes for 2025}
2. _{Bloomberg News (January 2025). Copper Price Holds Near 9-month Low as 2025 Opens With Eyes on China}
3. _{Caldwell, Preston (January 2025). What Trump’s Tariffs Would Mean for the US Economy}
4. _{Burton, Melanie (February 2025). US Metal Buyers Likely to Turn to Mideast, Chile as Tariffs Bite}