A bronze bull statue in Shanghai. Stock image.
Traders landing in London late last week for a key event in the copper market felt optimistic as prices approached record highs.
Then came announcements shaking things up.
On Friday, prices dropped nearly 5% after President Trump threatened significant import tariffs on Chinese products, effectively dampening a recent rally in stocks that had propelled industrial metal prices upwards.
However, Trump softened his stance in later messages, and by Monday morning, copper prices rebounded. Still, the growing trade tensions introduced a layer of uncertainty to the annual LME Week, which gathers thousands of miners, traders, investors, and manufacturers for various networking events and discussions.
If either President Trump or Chinese President Xi Jinping steps back from escalating tensions, attention could return to several bullish elements that traders believe might push prices higher. These include the disruptions in production due to accidents at major copper mines, a rising investor interest in copper as an alternative to the dollar, and increasing long-term demand driven by electrification trends.
“Trade issues could be transformational in the short run,” remarked Paul Krohn, vice president of metals at SEFE Marketing and Trading. “I think this dip represents a buying opportunity, but it’s unclear how steep the decline might be. Eventually, when prices drop sufficiently, China could jump in.”
Market sentiment improved on Monday after Trump signaled a willingness to negotiate with China. Copper rose by 1.1%, hitting $10,632 a tonne by 9:21 a.m. Shanghai time, alongside a rise in U.S. stock futures and stabilization in cryptocurrencies after Friday’s downturn.
The increasing worries about the U.S.-China trade conflict reveal an inconvenient reality for the copper market. Demand for physical copper from end-users has been tepid lately, causing some staunch supporters of the metal to hesitate.
Rather, significant supply disruptions have driven prices upward. For instance, the Kamoa-Kakula complex in the Democratic Republic of the Congo began the year with booming production, establishing itself as a noteworthy success in the copper sector. However, in May, seismic activity led to flooding in one of its underground mines, causing a significant setback.
In another incident on July 31, a rock explosion at Codelco’s premier mine in Chile resulted in six fatalities, halting operations for over a week. Although work resumed in unaffected sections of El Teniente, this tragic accident has jeopardized the state-owned producer’s recovery efforts from an ongoing recession that could threaten its status as the top global supplier.
“Our mining industry is revealing many vulnerabilities,” stated Juan Carlos Guajardo, founder of mining consulting firm PlusMining. “It simply lacks the resilience needed to meet current challenges.”
The latest setback involved a deadly landslide at Freeport-McMoRan’s Grasberg mine in Indonesia last month, which halted operations and contributed to a spike in copper prices that reached $11,000 last week. Coupled with losses from other project mishaps, the copper market is facing a significant supply crunch, with Morgan Stanley predicting next year’s production to fall 590,000 tonnes short of demand, marking the largest deficit since 2004.
The Grasberg incident “has compelled all those already attentive to an imbalanced copper market to confront the reality of underwhelming supply,” commented Ivan Petev, head of base metals at Gambar Group, during the Financial Times’ Metals and Mining Summit in London on Friday. Prior to Trump’s tariff threats, he had forecast that prices might exceed $15,000 a ton by the end of the year.
“There’s a renewed energy in the copper market,” he added.
Traders and analysts are also noticing increased investor enthusiasm for copper, as the metal benefits from various investment trends. This uptick in prices has raised concerns for some.
“Navigating price fluctuations has made us acutely aware of the broader market dynamics. We’re seeing volatility everywhere—from gold to American tech stocks. It’s a reminder that the situation could come back to bite us,” Petev noted.
Friday’s price drop was another in a series of sharp swings tied to U.S. presidential actions. Back in April, traders were on edge as Trump announced reciprocal tariffs, leading to a 16% price drop within three days due to rising panic over the implications for manufacturing and global trade.
Prices bounced back when Trump retracted the tariffs. Then in July, more chaos ensued with talk of a 50% import tariff on copper, followed by a walk-back of those plans.
Over the weekend, some traders in London shared darkly humorous memes, suggesting that trading copper in the future could feel akin to navigating the world of cryptocurrencies.
