Copper production in the US is unlikely to get a significant boost from the recently announced US tariffs, according to the ING Group.
On Tuesday, US copper futures reached an unprecedented high, surging by a record 17% in a single day.
This came after the US President Donald Trump announced plans for a 50% tariff on copper imports, aiming to boost domestic production and lessen reliance on foreign sources.
The administration hopes this tariff will spur new mining projects and bolster the US copper industry. Conversely, LME prices fell over 4% earlier this morning.
Despite consuming a significant portion of the world’s copper, the US only produces about 5% of the global supply.
What’s more, previous tariffs on steel and aluminium did not lead to increased domestic production of the two metals.
The US steel industry’s output in 2024 saw a 1% decrease compared to 2017, predating Trump’s initial tariffs. Similarly, the aluminum industry experienced a nearly 10% reduction in production.
Copper import tariffs, a first for the US, are expected by July end, Commerce Secretary Howard Lutnick announced. The levy’s size exceeded market expectations of up to 25%.
In February, Trump ordered a Section 232 investigation into copper imports and said, “It’s time for copper to come home.”
However, the 270-day deadline for the investigation would have allowed it to continue until November.
Impact on market
ING’s commodities strategist Ewa Manthey said the tariffs are likely to be positive for COMEX copper prices for now.
Manthey said in the report:
More buying is likely before tariffs come into effect.
“However, the arbitrage has led to a buildup of inventories in US warehouses, which could temporarily buffer the market once the tariffs kick in.”
A 50% tariff on copper imports poses a risk of demand destruction, leading to record-high copper prices in the US.
This, in turn, could fuel inflation, increasing costs for US manufacturers who lack a domestic alternative, according to Manthey.
This situation unfolds as Trump simultaneously pressures the Federal Reserve to lower interest rates.
“Yet this will be bearish for LME prices, with the wave of copper rushing to the US likely to stop once the tariffs are implemented,” Manthey said.
Comex copper inventories doubled in the second quarter of this year, reaching 2018 highs and now exceeding combined LME and SHFE holdings.
Increased copper availability outside the US, likely leading to more copper in LME warehouses, would put downward pressure on LME copper prices.
The strong flow of copper into the US will be supported by the COMEX-LME arb, which has now widened to over $2,000 per ton. This situation is likely to unfold only once tariffs are in place.
Import reliance
According to the US Geological Survey (USGS), the US accounts for approximately 5% of both global copper mining output and total copper reserves.
However, the country’s copper production has been declining, with a roughly 20% drop over the last decade. Last year, US copper production decreased by 3%, following an 11% decline in 2023.
A key factor contributing to this decline is the extensive permitting process for new mines, which can take up to 29 years.
Freeport-McMoRan operates the Miami smelter in Arizona, while Rio Tinto owns the Kennecott smelter in Utah. These are the sole two active primary copper smelters in the US, despite some existing idled capacity.
“Export restrictions on scrap and ore, along with faster mine permitting, may better support US copper production than tariffs, as major US copper players have already suggested,” Manthey said.
The Section 232 investigation notes that mitigation could include tariffs, export controls, or incentives. Tariffs are just one of several options.
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