U.S. Copper Tariffs May Lift Prices but Have Limited Impact on Imports

Potential U.S. tariffs on copper are unlikely to curb imports but could push domestic prices higher, benefiting American producers like Freeport-McMoRan. Since the U.S. election, the Comex-LME copper futures spread has widened, with the Comex premium averaging 5% (20 cents per pound) since November 2024 and reaching 7% (30 cents) in the spot market.

UBS argues that copper tariffs lack strong economic justification, as they would raise costs for consumers without significantly boosting U.S. mining or smelting investment. However, tariffs could sustain the Comex premium, favoring domestic refined copper producers. The U.S. imports 800,000 tonnes of refined copper annually—about half its consumption. While potential restarts of the 200,000-tonne Hayden smelter and expanded production at Rio Tinto’s Garfield facility may reduce reliance on imports, they won’t eliminate it.

Domestic copper supply growth faces permitting challenges rather than economic barriers, making it unlikely that tariffs would drive major mining investments. The U.S. remains a net exporter of copper concentrate and scrap while importing refined and semi-fabricated copper. Tariffs could shift scrap flows, increasing domestic processing but squeezing refining margins.

Despite short-term volatility from speculative trading, UBS remains bullish on copper due to limited mine supply growth and strong demand. Its top copper stock picks include Antofagasta PLC (LON:ANTO), Anglo American PLC (LON:AAL), and Freeport-McMoRan Copper & Gold Inc (NYSE:FCX).