Analysts say the U.S. industrial sector would suffer the most from potential tariffs on copper, with costs expected to rise sharply during the lengthy process of rebuilding domestic mining and refining.
President Donald Trump on Tuesday launched a probe into potential new tariffs on copper imports, saying they would help rebuild U.S. production.
U.S. prices of the metal used in power, construction and electric vehicles have already shot up on the U.S. COMEX exchange and a sustained period of buoyant prices may dampen industrial activity, curb consumption and force companies to use aluminium instead, analysts said.
Falling Output
The U.S. imports nearly half of its copper needs, according to the U.S. Geological Survey, and its copper mine output has fallen 11% since 2021 as miners struggle to expand existing mines and develop new projects.
The largest suppliers are Chile, Canada and Mexico.
“The U.S. has no chance of beefing up their own production and refining capacity anytime soon, so this looks like another own goal,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
The premium of prices on COMEX over benchmark international copper on the London Metal Exchange (LME) surged to $816 per metric ton on Wednesday from $580 a day earlier, although this is still below a record peak of $1,153 seen on February 13.
There are only two operating U.S. copper smelters.
Multiple Challenges
Asarco, controlled by industrial conglomerate Grupo Mexico, said in May last year it was planning to restart its mothballed copper smelter in the U.S.
“But there has been no news since and there aren’t any other recently mothballed smelters, while constructing a new one would take more than two years,” Amy Gower, an analyst at Morgan Stanley, said in a note.
“New copper mines would take much longer, with many facing permitting challenges,” she added.
Development of Rio Tinto and BHP’s massive Resolution Copper mine in Arizona is on hold, having faced opposition from Native Americans.
(With inputs from Reuters)
