In the first half of 2023, copper prices experienced significant volatility, primarily influenced by U.S. tariff policies and broader economic concerns. Early in the year, prices peaked as speculation grew that the U.S. would impose additional tariffs on imported copper. This expectation caused fears of rising import costs, resulting in a substantial rally for COMEX copper and lifting prices for LME and SHFE copper, which reached an unprecedented high of 83,000 yuan.
However, this upward momentum was short-lived. In early April, the U.S. unexpectedly implemented reciprocal tariffs, coupled with escalating countermeasures from other nations. This development heightened fears of global supply chain disruptions, which not only threatened economic growth but also potentially increased inflationary pressures. Consequently, copper prices experienced a sharp decline, plummeting to an eight-month low of 71,320 yuan.
Despite this downturn, negotiations began between the U.S. and other countries to address trade tensions. After a temporary reduction in some tariffs, the market briefly entertained the idea of a de-escalation. However, ongoing uncertainties, particularly regarding the direction of U.S. trade policy under the current administration, overshadowed any immediate prospects of recovery.
Meanwhile, the tightness in copper ore supply has persisted. Smelters are facing increasingly low processing fees, with recent long-term contracts reflecting zero treatment and refining charges. This trend indicates critical challenges for production profitability, especially as emerging pressures on smelters are expected to escalate throughout the latter half of the year.
Further complicating the landscape are the effects of the U.S. tariffs on global copper flows. An imbalance created by the relative strength of the U.S. copper market led to increased imports and declining inventories elsewhere. As domestic demand traditionally wanes during the second quarter, this dynamic has prevented significant inventory accumulation in non-U.S. regions.
Looking ahead, the copper market’s trajectory remains heavily contingent on U.S. tariff policies and their associated impacts on supply and demand dynamics. While some analysts speculate potential price support arising from anticipated cuts in smelting capacities, heightened vigilance regarding geopolitical developments and unexpected events is advised due to the uncertainty surrounding U.S. trade intentions.
Despite the hurdles faced in the copper market, some optimism can be drawn from the notion that resolving tariff issues could stabilize global trade and improve supply chain flows, benefiting prices in the long term. Moreover, the focus on clean energy transition and increased infrastructure spending provide a potential avenue for copper demand growth, positing a hopeful future outlook for the industry.