‍Trump Tariffs Shake Up Copper: A New Bull Run?

Geopolitics & the Copper Market

The copper market has experienced significant volatility in early 2025, with futures spiking to $4.84 per pound in February, a notable increase from the previous two-year average of around $4 per pound. This surge is largely attributed to U.S. President Donald Trump's aggressive trade policies, including the imposition of tariffs on key trading partners such as Canada, Mexico, and China. These tariffs have introduced new dynamics into the copper market, influencing both supply chains and pricing structures.

Historically, copper has been a reliable indicator of global economic health. The current administration's focus on reshoring manufacturing and securing supply chains has elevated copper's strategic importance. This policy shift aims to reduce dependence on foreign sources, potentially leading to increased domestic production and investment in the copper industry.

Supply Chain Security: A Policy Shift

Under President Trump's administration, there has been a pronounced emphasis on securing supply chains for critical materials, including copper. The proposed tariffs are designed to incentivize domestic production by making imports more expensive. However, this approach has raised concerns about potential cost increases for U.S. consumers and industries reliant on copper, as domestic production may not immediately meet demand.

Major mining companies, such as Rio Tinto and BHP, have acknowledged the potential risks posed by these geopolitical shifts but remain optimistic about the long-term benefits of the energy transition. They highlight their substantial copper and lithium assets as strategic advantages in this evolving landscape.

Underinvestment & the Case for Higher Prices

Despite copper prices reaching historically high levels, investment in new mining projects has been limited. Challenges such as extended permitting processes, complex regulatory environments, and escalating capital costs have deterred significant new developments. Industry experts suggest that an incentive price between $6 to $8 per pound is necessary to stimulate substantial investment in new projects.

This underinvestment, coupled with increasing demand from sectors like renewable energy and electric vehicles, could lead to a supply-demand imbalance. Such a scenario may drive prices higher, presenting potential opportunities for investors. Additionally, record-low treatment and refining charges indicate concerns about insufficient copper supply to meet future demand.

Tariffs & Global Demand: The China Factor

While U.S. tariffs aim to bolster domestic production, the global copper market remains heavily influenced by demand from China, the world's largest consumer of the metal. Any slowdown in China's economic growth or shifts in its industrial activity could significantly impact global copper demand and prices. Conversely, if China's demand remains robust, it could offset some of the supply constraints caused by trade tensions and underinvestment elsewhere.

The interplay between U.S. trade policies and China's economic trajectory creates a complex environment for copper investors. Monitoring these developments is crucial for making informed investment decisions in the copper market.

Why Investors Should Consider Copper Now

Copper's integral role in various industries, particularly in the energy transition towards renewables and electric vehicles, ensures sustained demand in the foreseeable future. The current geopolitical landscape, marked by trade tensions and a focus on supply chain security, has introduced volatility but also potential opportunities for investors.

Investors might consider exposure to copper through various avenues, such as equities in mining companies or commodity-focused funds. For instance, the United States Copper Index Fund (CPER) offers direct exposure to copper prices. As of February 24, 2025, CPER is trading at $28.52. Equity investments in major copper producers like Freeport-McMoRan, Southern Copper Corporation, and Rio Tinto are also options, with their stock prices at $37.24, $93.16, and $63.35 respectively on the same date. Also junior options like Marimaca Copper, Hot Chili , American Eagle, Pan Global Resources, ATEX Resources and Ngex Minerals.

While short-term volatility is likely due to policy changes and global economic shifts, the long-term outlook for copper remains positive. The combination of underinvestment in new supply, increasing demand from emerging technologies, and strategic policy shifts suggests that copper prices may continue to rise, offering potential gains for well-positioned investors.

In conclusion, the current geopolitical and economic climate presents a unique set of challenges and opportunities in the copper market. Investors should conduct thorough research and consider diversifying their portfolios to manage risks while capitalizing on the potential upside in this essential commodity.

Actionable Takeaways for Investors in the Copper Market

Monitor U.S. Trade Policies & Tariffs

• Trump's tariff policies are reshaping the global copper market. Investors should track any new trade restrictions, particularly those affecting copper imports and exports, as they may create supply constraints or opportunities for domestic producers.
• Watch for policy shifts that promote U.S. mining and refining capacity, which could benefit domestic copper producers.

Assess Supply Chain Security Trends

• The push for self-sufficiency in copper refining and production could drive new investments in the U.S. and other Western nations.
• Companies with operations in politically stable jurisdictions, such as Freeport-McMoRan and Southern Copper Corporation, may benefit from these policy changes.

Invest in Copper Miners Positioned for Growth

• Major Miners: Large-cap copper producers like BHP, Rio Tinto, and Freeport-McMoRan are positioned to benefit from sustained demand.
• Junior Miners: Companies with promising copper projects but in earlier development stages could provide higher-risk, higher-reward opportunities as copper prices rise.

Consider Copper ETFs & Commodity Funds

• If direct investment in mining stocks is too volatile, copper-focused exchange-traded funds (ETFs) such as the United States Copper Index Fund (CPER) offer exposure to copper price movements with less company-specific risk.

Watch Copper’s Role in the Energy Transition

• Copper is essential for electric vehicles (EVs), wind turbines, solar power, and grid infrastructure.
• Companies that supply copper to these industries may outperform, particularly as governments worldwide push for cleaner energy.

Track China’s Economic Health

• As the largest consumer of copper, China’s economic policies, industrial demand, and fiscal stimulus measures significantly impact copper prices.
• A slowdown in China could limit upside potential, while stimulus measures could drive a new demand surge.

Look for Supply Constraints & Investment Gaps

• Current underinvestment in new copper projects suggests future supply shortages, which could push prices higher.
• With many experts citing $6-$8/lb as the incentive price for new developments, any prolonged period of copper above these levels could trigger a wave of new investments.

Be Prepared for Short-Term Volatility

• Copper prices have historically been cyclical, often dropping back after strong rallies. However, long-term fundamentals support higher prices.
• Consider using a dollar-cost averaging strategy to build exposure over time, rather than making large single investments at peak prices.

Pay Attention to Treatment & Refining Charges (TC/RCs)

• Record-low treatment and refining charges signal a tight market, as smelters compete for limited copper concentrate supply.
• A tightening supply situation could further push copper prices higher, making miners with low-cost operations more profitable.

Diversify Within the Commodities Sector

• While copper is a strong long-term play, diversification across other industrial metals like nickel, lithium, and rare earth elements can help balance risk.
• Some companies have diversified exposure to multiple critical metals, positioning them well for the broader energy transition.