U.S. President Donald Trump signs an executive order in the Oval Office at the White House on February 25, 2025 in Washington, DC. Trump directed the Commerce Department to open an investigation into potential tariffs for copper imports.
Alex Wong | Getty Images News | Getty Images
Copper miners are likely to see divergent outcomes as U.S. tariffs on the metal loom — raising the potential for a domestic supply crunch while also driving up the U.S. copper price premium over the London Metal Exchange.
U.S. COMEX copper futures jumped Tuesday night and on Wednesday after U.S. President Donald Trump signed an executive order mandating a review into potential copper tariffs or quotas, citing national security concerns. The review is also set to look into domestic demand, production levels and “the impact of foreign government subsidies, overcapacity, and predatory trade practices on United States industry competitiveness.”
The announcement did not surprise the market given Trump had previously alluded to the move, during discussion of his upcoming 25% tariffs on steel and aluminium, Piotr Ortonowski, head of copper market analysis at Benchmark Mineral Intelligence, told CNBC.
The market has also been pricing for the introduction of tariffs on Canada and Mexico, two of the biggest sources of copper imports into the U.S.
But traders continue to be engaged in a guessing game, including how big the tariffs will be and whether there could be exemptions for countries like Chile which would minimize the market impact, Ortonowski said.
“The grand idea behind tariffs is to lift the domestic supply of copper, and there is a plentiful pipeline of mining projects within the U.S., but the main problem there is permitting. So even though higher prices may incentivize the development of projects, the key bottleneck will be permitting,” Ortonowski said.
“Even if projects were fast-tracked and permitting problems lifted overnight, it would be four to five years until we see domestic production substantially increase.”
The arbitrage spread between U.S. COMEX prices over those on the London Metal Exchange widened above $1,100 per tonne on Feb. 13 on tariff expectations before cooling back toward $400, according to Benchmark, COMEX and LME data. Trump’s announcement this week has seen that spike back up over $700.
Typically that gap would drop again over time and historically settle close to zero, Ortonowski continued, but the introduction of tariffs will see it remain elevated — with U.S. consumers taking the brunt of the higher prices.
ING strategists said in a Thursday note that there was an “additional upside risk for copper in New York if tariffs are applied” — but that the arbitrage spread “risks a pullback if tariffs fall short of expectations.”
U.S. operator advantage
These market dynamics mean companies with pre-existing U.S. production stand to benefit, analysts say.
New tariffs will bring upward pressure on prices given the U.S. relies on imported copper for just under half of its total consumption, Matt Britzman, senior equity analyst at Hargreaves Lansdown, told CNBC.
Freeport-McMoRan and Rio Tinto are among the largest U.S. domestic producers of copper and are potential beneficiaries, Britzman said.
Alex Hacking, equity research analyst at Citi, also named Freeport-McMoRan — which processes around 1.4 million pounds of copper in the U.S. each year — as the big winner in the bank’s coverage.
“A 10% copper tariff would flow straight to COMEX prices, in our view,” Hacking said in a note published Wednesday, estimating a boost in Freeport’s attributable profit of around 9% and free cash flow boost of around 37%.
More broadly, winners would be U.S. based copper miners with access to domestic processing, Hacking added, again noting the expected COMEX premium over LME from tariffs.
“Exported concentrate would likely get taxed on the way back in, in our view. Downstream fabricators could also benefit if downstream products are included, as in steel and aluminum,” Hacking said.
Hargreaves Lansdown meanwhile cautioned in a Wednesday research note that while higher copper prices following the announcement initially boosted mining stocks — because of the expectation that orders will pile up as U.S. manufactures attempt to build up stocks ahead of tariffs — this would only be a short-term boost.
“If tariffs lead, as expected, to increased consumer prices and higher-for-longer interest rates, there is likely to be a knock-on effect on growth and orders across a range of industries, which could lead to lower metal demand for metals and a drop in prices,” Hargreaves Lansdown’s head of money and markets, Susannah Streeter, said.
“Producers in Chile wouldn’t benefit at all” from the new tariff regime, Benchmark’s Ortonowski told CNBC. “U.S. consumers will take the brunt of higher copper prices.”
On the implications for equities from the tariff review, Morgan Stanley analysts on Wednesday said that companies such as Antofagasta, the London-based Chilean miner, would likely continue exporting to the U.S. with rising COMEX premia absorbing tariffs, or would “re-divert cathode exports to other regions, depending on freight differentials.”
The Morgan Stanley research found that every 10% change in revenues at Rio Tinto’s Kennecott copper mining operation near Salt Lake City would impact group 2025 earnings before interest, taxes, depreciation and amortisation (EBITDA) by around 1%. It had the same estimation for the earnings impact at Polish miner KGHM from its U.S. Robinson and Carlotta mines.
On Canada’s Lundin Mining, it noted that while the firm’s Eagle mine is located in the U.S. where it produces nickel concentrates with copper by-product, the “nickel concentrates are exported to smelter facilities in Canada and sold under long-term contracts, rather than being sold within the U.S.”
— CNBC’s Michael Bloom contributed to this story.
