Why now might be the time for copper

Despite a sharp sell-off following Trump’s so-called Liberation Day, copper has shown surprising resilience in the face of mounting concerns over a global economic slowdown. As a widely regarded gauge of economic health, copper’s resilience appears to run counter to expectations, with prices advancing even as global growth forecasts continue to be revised lower. What is driving this unexpected strength?

In this article, we explore how a combination of short-term demand catalysts is helping establish a price floor, while long-term structural tailwinds continue to paint a compelling case for copper in the years ahead.

Key takeaways

• Lingering uncertainty over copper-specific tariffs is forcing US manufacturers to continue frontloading imports, providing support for global copper prices
• Accelerated de-stocking of Shanghai Futures Exchange copper inventories suggests healthy demand and indicates current pricing may be viewed as attractive by Chinese buyers.
• While short-term volatility may affect copper pricing, long-term demand tailwinds such as electrification, artificial intelligence and renewable energy remain intact.

What doesn’t kill you makes you stronger

When President Trump unveiled sweeping reciprocal tariffs on April 2nd, which ranged from 10% to as high as 60% for certain countries, markets responded with immediate alarm. Equities and commodities sold off sharply amid fears of escalating trade tensions, supply chain disruptions, and a broader economic slowdown. Unsurprisingly, copper, often dubbed “Dr. Copper” for its ability to gauge global economic health, was among the hardest hit. What few anticipated, however, was copper’s swift rebound. In the past month, the metal has clawed back nearly all its losses since “Liberation Day” and is now outperforming both US and global equity benchmarks on a year-to-date basis.

We see three key factors currently supporting copper prices in the short term. The first—and most immediate—is the market’s view that President Trump’s sweeping tariff proposals are unlikely to remain in place over the long run. This expectation also underpins the rebound in equity markets from their “Liberation Day” lows, despite ongoing uncertainty around international relations and US policy direction. However, copper’s outperformance relative to equities can be attributed to two additional forces: persistent uncertainty around copper-specific tariffs and resilient demand from Chinese buyers.

Demand born from uncertainty and necessity

While many commodities have already been hit with steep and disruptive tariffs, copper remains one of the few materials to have escaped direct import taxes—at least for now. That exemption, however, may be temporary. On February 25th, President Trump announced a national security review into US copper imports, with the stated goal of eventually imposing tariffs (speculated to be around 25%) on all inbound copper. The official deadline for the review is November but given the administration’s increasingly unpredictable approach to policy enforcement, tariffs could be introduced at any point before then.

In response, US copper consumers have been scrambling to front-load imports, rushing to secure supply before potential taxes come into effect. This surge in demand is evident in the widening gap between US and global copper prices, which would otherwise be trading in lockstep.

As of May, copper futures on the COMEX are trading at an 8% premium – about US$750 per tonne – compared to those on the London Metals Exchange (LME). That spread had peaked at nearly US$1,400 per tonne in March, representing a 13.6% cost increase for US buyers. The persistent price divergence reflects intense import demand, as traders are incentivised to exploit arbitrage opportunities by sourcing copper from international markets and selling into the US at elevated prices.

While some argue that Trump’s recent softening on trade rhetoric lowers the near-term likelihood of copper tariffs, the mere presence of uncertainty continues to drive precautionary behaviour. US copper consumers will likely remain compelled to stockpile inventory as a hedge against potential policy shocks. That is to say, as long as the national security review remains active without a definitive outcome, this front-loading dynamic is likely to persist – providing structural support for copper prices.

Moreover, once copper enters the US, it becomes effectively locked out of the global supply chain. Re-exporting is uneconomical due to the current price premium paid on import, which in turn tightens the availability of copper for global buyers. This fragmentation could further distort global supply dynamics and exert additional upward pressure on prices.

When the price is right

China is the most consequential copper market in the world, being responsible for ~55% of the world’s copper consumption. As such, it is always prudent for copper investors to monitor demand from the Chinese market and gauge the country’s appetite for the metal at different price levels.

A commonly cited proxy for Chinese copper demand is the inventory level on the Shanghai Futures Exchange (SHFE). These stockpiles follow a well-established seasonal pattern, typically rising from January to February as factories shut down for Chinese New Year, before drawing down from March onward as industrial activity resumes. Investors often track the pace of this de-stocking to gauge real-time demand – where a sharper decline generally indicates stronger consumption.

This year’s drawdown has been particularly pronounced. Over the past two months, SHFE copper inventories have fallen by more than 185,000 tonnes, pointing to robust underlying demand despite prevailing concerns about China’s broader economic challenges. The significance of this trend becomes even clearer when contrasted with 2024, when elevated inventory levels persisted for much of the year. Back then, Chinese buyers effectively went on strike as speculative activity drove copper prices to near all-time highs of US$11,000 per tonne.

What does this signal for investors? In our view, the sharp inventory reduction in 2025 suggests “the price is right” – that copper is no longer overextended, as it was for much of 2024. This return to demand-driven buying also suggests a more fundamentally grounded market, potentially offering a compelling entry point for investors with a long-term horizon.

The road may twist and turn, but the destination does not change

While short-term disruptions can be unsettling, especially in today’s news-driven markets, for long-term investors, it is usually wise to ignore the waves and keep your eyes on the horizon (helps with the seasickness). In the case of copper, the long-term view remains compelling. Structural demand drivers such as electrification, renewable energy, artificial intelligence, and power grid modernisation are all intact, regardless of recent volatility. None of the current noise meaningfully undermines the long-term investment case. In fact, softer prices may have the opposite effect by discouraging new copper mine development, worsening the supply deficit already projected by analysts. BloombergNEF, for instance, forecasts a 21 million tonne shortfall by 2050—almost double today’s global production.

As with any commodity, rising demand and constrained supply are a recipe for higher prices over time. For investors willing to ride out the swells, any pullback in copper or copper miners from short-term volatility could prove to be a rewarding entry point in the years ahead.

A Good Time for Copper?

Copper’s resilience amid rising geopolitical uncertainty and slowing economic momentum is no accident. In the short term, aggressive front-loading by US manufacturers and strong Chinese demand have provided a firm price floor. Over a longer horizon, copper’s central role in transformative global trends such as electrification, renewable energy, artificial intelligence, and infrastructure, continues to drive its structural investment appeal.

Much like navigating rough seas, commodity investing often demands a steady hand and a long view. Policy shocks may stir near-term turbulence, but copper’s outlook is anchored in powerful, structural trends. For investors prepared to weather the volatility, the long-term case for copper remains as strong as ever.

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