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March 6 (Reuters) - The U.S. will find it hard to replace imported aluminium and copper in the event of tariffs as the world's biggest economy is heavily reliant on offshore supplies, ANZ said on Thursday.
U.S. President Donald Trump is planning to restore 25% tariffs on aluminium imports from March 12 and has ordered a probe into possible new tariffs on copper imports. Tariffs on most imports from Mexico and Canada took effect on Tuesday.
"The ability of the U.S. to replace refined copper imports with domestic supply in the short term is limited," said ANZ in a note, adding there is a relatively low appetite for investing in new primary smelting capacity in the U.S. over the medium term.
"Assuming a 25% tariff on all copper imports, we would expect to see higher prices for copper and a higher U.S. cathode premium on the Chicago Mercantile Exchange," the bank noted.
On aluminium, ANZ said that structural deficit in the U.S. market is unlikely to change in the near term, estimating the supply gap between U.S. output and consumption in 2025 will be one million tons higher than in 2019.
"U.S. import substitution for primary aluminium is unlikely to materialise anytime soon... We expect ongoing upward pressure on prices if the tariffs stay in place."
Price premiums for aluminium on the physical market in the United States have surged to a record high and most active May copper futures on the U.S. Comex exchange have lately surged amid tariff worries.
Meanwhile, Citi in a note highlighted that they expect ex-U.S. copper pricing to fall to $8,500 per ton in second quarter of this year as investors' copper positioning unwinds on tariff headwinds.
Three-month copper on the London Metal Exchange $(LME.AU)$ CMCU3 was trading at $9,624 a metric ton, as of 0803 GMT, while LME aluminium CMAL3 was around $2,679 a ton. MET/L
(Reporting by Rahul Paswan and Anushree Mukherjee and Anjana Anil in Bengaluru; Editing by Jacqueline Wong and Christina Fincher)
((anushree.ashishMukherjee@thomsonreuters.com;))
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