PieTrader

Copper is the third most consumed metal in the world. It is also known as a highly conductive material. The properties of copper include good electrical conductivity, excellent thermal conductivity, corrosion resistance, high ductility, recyclability, and non-magnetic properties. The copper market is segmented by end consumer industries (automotive and heavy equipment, construction, electrical and electronics, industrial and other end consumer industries). Recently, the development of electric vehicles has increased the demand for copper. The leaves, stator, rotor, shaft end, hollow wire and motor used in electric vehicles are composed of heavy copper. Major copper producing countries include Chile, Peru and China. Chile produces more than a quarter of the world's copper, and is by far the country with the largest copper reserves. Escondida, located in the Atacama Desert in Northern Chile and owned by mining company BHP, is the largest copper mine in the world by total copper reserves, production capacity and actual copper output.

In the face of signs of new supply flows to North America and concerns about slower demand, copper futures in the US dropped toward $4.65 per pound from the four-week high of $4.82 reached on May 23. Due to significant investment in South American mines, the International Copper Study Group reported that the market for copper was in a 289,000 ton surplus in the first quarter, up from 268,000 tons the year before. Since metal has been shipped to the US in order to thwart any tariff declarations by US President Trump, the backwardation for LME futures suggested a tight physical supply in the near future. In an effort to boost the domestic economy and bring more smelters onshore, Trump had earlier launched an investigation into copper imports. Still, signals of higher data center expenditure by tech companies underpinned long-term buying, aligned with the metals need in other electrification technologies.

The Copper's market is trying simultaneously to price in both the broader tariff threat to global manufacturing activity and the specific threat of U.S. tariffs on copper imports. Copper's initial reaction to Trump's tariffs tells you how negative the market thinks the potential hit to manufacturing activity and copper demand will be. Analysts have moved quickly to downgrade their price forecasts on concerns about the dampening effect on global economic growth.