Copper Prices Rise Amid US Tariff Fears and Global Deficits
Copper prices approach record highs as US buyers hoard supplies to avoid proposed tariffs while the rest of the world faces a significant supply deficit.
Copper prices have climbed 17% this year, nearing record highs due to sustained demand from artificial-intelligence data centers, defense, and electrification. While the International Energy Agency predicts a primary supply deficit of 25% by 2035 caused by regulatory hurdles and declining ore grades, the current market is experiencing a sharp dislocation in the United States.
The Federal government of the United States proposed a 15% tariff on refined copper, prompting domestic buyers to hoard the metal in warehouses. This behavior has created a domestic surplus in the United States, even as Wood Mackenzie identifies a global deficit of 460,000 metric tons elsewhere. Analysts indicate that prices could fall if the White House abandons the tariff proposal or if inflation concerns continue to weigh on the market.
Investors attempting to capitalize on these trends face structural challenges. Those using the United States Copper Index Fund are seeing performance drags from a steep contango in the futures curve, while investors in the Sprott Physical Copper Trust are dealing with higher fees and a market price that trades at a discount to net asset value.
