U.S. Stockpiling Copper Causes Price Hikes and Shortages
China's copper inventories are rapidly depleting and could reach zero by mid-June 2025, according to Mercuria, a leading commodities trader. This alarming trend is driven by surging U.S. demand amid fears of impending tariffs from the Trump administration. The U.S. has imported approximately 500,000 tons of copper in anticipation of these tariffs, significantly higher than the typical monthly imports of around 70,000 tons.
This has intensified competition with China for global copper supplies, leading to a record weekly drop of 55,000 tons in Chinese inventories, now at 116,800 tons. The arbitrage between higher copper prices on New York’s Comex and London’s LME has further incentivized traders to redirect supplies to the U.S. Additionally, potential U.S. bans on copper scrap exports, of which China is a major importer, could exacerbate the supply crunch. Analysts predict that these dynamics may result in one of the most severe tightening shocks the copper market has ever experienced.
Secondary Effects
Sectoral Rebalancing: Renewable energy and EV sectors — both heavy copper users — could see project delays or cost overruns.
Trade Realignment: Emerging economies rich in copper reserves (e.g., Peru, DRC) may gain geopolitical leverage.
Investor Shifts: Commodities could regain favor as an inflation hedge, pulling capital from equities and bonds.
Forecast:
Base Case — $10,000–$11,000/ton (55%)
Moderate U.S. tariffs take effect, driving sustained copper demand from American buyers. Chinese inventories keep falling, but Beijing manages the decline with measured reserve releases. Global supply remains constrained, while demand from construction and renewables stays solid. Market remains tight but avoids panic. Prices stay elevated, supported by structural deficits and trade dislocations.
Upside Case (Political/Economic Softening) — $8,500–$9,000/ton (25%)
Tariff threats ease post-election; U.S.-China trade tensions de-escalate. China offloads strategic reserves to stabilize its market. Weak global growth leads to softer industrial demand, especially in housing and manufacturing. Supply chains improve and investor sentiment shifts. Prices correct downward, offering relief to downstream industries.
Downside Case (Geopolitical Shock) — $12,500+/ton (20%)
U.S. imposes aggressive tariffs and curbs copper scrap exports; China retaliates. Supply chain disruption intensifies with potential mining strikes or export restrictions in Chile or DRC. Clean energy demand surges. Inventories run critically low, triggering hoarding and price spikes. Market faces a historic tightening shock.
