President Trump orders probe into copper imports

President Trump this week signed an executive order toinvestigate copper imports into the US, citing “significant vulnerabilities” and “increasing reliance on foreign sources”.

Theexecutive orderdoes not come as a surprise to the market, who have been anticipating tariffs on copper imports sinceTrump imposed tariffson aluminium and steel earlier this month. The exact mechanism by which any impacts will be mitigated will be decided within 270 days.

However, although an import tariff would benefit domestic copper producers, Benchmark’s view is that tariffs may not result in more domestic production.

“Trump envisages these tariffs will incentivise more domestic production, but that’s definitely much easier said than done,” said Piotr Ortonowski, copper research lead analyst at Benchmark. “The trouble is thatpermittingin the US has been, by far and away, the biggest obstacle to bringing new mine capacity online.”

What is the US’ trade balance on copper?

The US relies on imports to meet half of its domestic refined copper demand, according to Benchmark’s Copper Forecast. The largest exporter of copper to the US is Chile, followed by Canada.

Given Trump’s move to place significant tariffs on Canada, a copper tariff on top of this would be significant. However, it is yet unclear exactly how a potential tariff would be implemented.

Although China is the largest producer of refined copper, the US imports very little from the country due to pre-existing tariffs. Overall, the US is a net exporter of copper to China primarily in the form of copper scrap.

How could a copper import tariff impact domestic production?

If a tariff on copper imports were to be imposed, this would no doubt benefit domestic copper producers. However, the US already has a sizeable pipeline of copper projects, with permitting acting as a major bottleneck.

Previously, Trump has said his administration will try to streamline the permitting process.

“However, even if all of these operations got the green light overnight, taking the example of a greenfield copper mine, it would take on average, around four years to go from the start of construction to first production,” Ortonowski said. “Nothing is going to happen overnight.”

Even if mines came online, there is currently insufficient domestic smelting and refining capacity to keep that copper within US borders.

What impact would a tariff have on copper prices?

The impact tariffs could have on the market is already being felt. Traders have been baking tariff assumptions into the price of US copper as seen by the price differential between the more globally focused London Metal Exchange and the US focused Comex.

“As soon as rumours of these tariffs emerged, we started to see the arbitrage between the Comex and the LME price shoot up,” Ortonowski said.

“So bottom line is, these tariffs will be inflationary,” Ortonowski said. “Yes, they may incentivise domestic production in the medium to long term, but that will certainly take quite a long time to bring about.”

Benchmark’s new Copper Service is coming soon, and will include a quarterly market forecast supplemented by monthly and weekly analysis of supply-demand dynamics.

In the meantime, if you’d like to learn more about the market insights Benchmark covers, sign up to our Copper Newslettervia the form below: