Copper prices are soaring in New York, driven by tariff concerns and heightened demand. A Bank of America analyst highlighted that the copper market is facing a significant supply crisis. Increased defense spending and the production of electric vehicles are anticipated to affect the supply and demand dynamics for copper.
This year, gold has also been hitting new heights above $3,000, but it’s not the only commodity in demand. Copper, which is utilized in a wide range of products from computers to electrical cables, is being eagerly purchased by traders amidst looming trade tariff threats. In New York, copper reached an all-time record of $5.374 per pound on Wednesday, translating to over $11,840 per metric ton. This figure surpasses the $5.20 per pound milestone achieved last May and represents nearly a 30% increase since the beginning of the year. Conversely, copper prices on the London Metal Exchange fell to as low as $9,893 per ton on the same day.
The ongoing tariff concerns have similarly propelled gold prices higher in New York compared to London, prompting a rush to transport bullion across the ocean to capitalize on the price difference. There has been significant stockpiling of copper in the US, leading to a supply crisis. Michael Widmer, the head of metals research at Bank of America, stated, “Market participants are now trying to find copper units to send to the US in anticipation of tariffs. We don’t have spare copper units available in the market. Increased investment in supply is crucial; otherwise, we may see an increasingly supply-constrained demand.”
Copper is integral in various applications.
Bloomberg reported that President Donald Trump’s tariffs on copper imports might be implemented sooner than expected. Commerce Secretary Howard Lutnick was granted up to 270 days to deliver a report assessing whether copper imports pose a threat to US national security. A recent presidential directive emphasized copper’s critical role in the nation’s economic stability and industrial strength, highlighting its importance in defense applications, infrastructure development, and emerging technologies. Many analysts now anticipate that Trump could announce tariffs as early as next week. Earlier this month, Goldman Sachs analysts forecast a minimum 25% tariff on copper and other metal imports. In a note last weekend, they expressed a “tactically cautious” stance on copper, indicating that any emphasis on China or a hawkish approach to reciprocal tariffs could negatively impact copper prices.
Rising defense budgets in Europe are also set to influence copper supply and pricing. Following uncertainties about the US commitment to NATO, countries are planning to boost defense spending. In February, UK Prime Minister Keir Starmer announced an increase in defense spending from 2.3% of GDP to 2.5% by 2027. Recently, Germany’s parliament approved a bill for record levels of defense and infrastructure expenditure. Widmer projected that between 2009 and 2030, the defense sector could potentially double its copper demand. Additionally, manufacturing electric vehicles and data centers also requires a substantial amount of copper. “We are continually adding to the demand side,” he noted.
Goldman Sachs has predicted a global copper deficit of 180,000 tons this year, influenced by factors such as electrification and decreasing production from mines. The International Copper Association anticipates global demand will grow by 1.85% annually, increasing from 28.3 million tons in 2020 to 40.9 million tons by 2040.
