MW How investors can cash in on record copper prices as traders try to get ahead of tariffs

By Myra P. Saefong

Copper prices on Comex settled at a record high last week

A decision by the U.S. government on widespread copper tariffs may not come for months, but preparation has kicked into high gear with traders looking to take advantage of a climb in U.S. prices for the industrial metal to their highest on record.

Overall market uncertainty, particularly as it relates to tariffs and potential trade wars, is impacting metals and "leading to pricing dislocations in some metals, like copper, which are trading at a premium in the U.S. relative to other parts of the globe," said Steve Schoffstall, director of ETF product management at Sprott Asset Management.

Price discrepancies for copper between New York and London, in particular, provide sophisticated investors with arbitrage opportunities, analysts said, while shares of copper miners may also stand to benefit from higher prices of the industrial metal.

U.S. companies are likely "using the luxury of time to frontload copper purchases ahead of expected tariffs," said Schoffstall - and that's contributing to higher prices for the metal in the short term.

In late February, President Donald Trump directed the Commerce Department to investigate the threat that copper imports pose to national security and to recommend ways, including tariffs, to mitigate any such threat.

The end goal of that may be to boost U.S. copper production, said David Aspell, co-chief investment officer at Mount Lucas Management, but any imposition of tariffs or other restrictions on copper imports aren't likely to come into effect for another nine months or so, given consultation periods. The secretary of commerce is required to submit a report to the president on the findings of the investigation within 270 days of the Feb. 25 order.

Despite the timeframe, investors appear to already be making preparations for the impact of potential tariffs.

"Investors aren't waiting around to find out what the tax could be," said Adam Turnquist, chief technical strategist for LPL Financial. "Front-running the potential tariff has unleashed a wave of near-term demand on copper housed in the U.S."

A Blomberg survey of four people with direct knowledge of some copper shipments showed that 100,000 to 150,000 metric tons of the metal are expected to reach the U.S. in the coming weeks, Bloomberg News reported on March 19. If the full volume arrives within the same month, that would mark an all-time monthly record high, the report said.

"Front loading" of copper imports to the U.S. to get in front of possible tariffs will "make the rest of the world somewhat short of copper, as it takes a while to increase supply," and the U.S. is willing to pay up now ahead of expected duties, said Mount Lucas's Aspell.

The higher demand for the industrial metal has contributed to a rise in copper prices to their highest settlement on record, analysts said. The May futures contract (HG00) (HGK25) ended at $5.1135 a pound on March 21, a record high based on data going back as far as January 1968, according to Dow Jones Market Data. The intraday record high still stands at $5.199 from May 20, 2024.

Read why copper's not a great economic indicator anymore

Copper prices have been climbing their way out of a bottom since August, said Turnquist. Tariffs threats have helped spark a near-term rally and "could drastically reshape global supply the longer they are implemented."

There has also been a rise in cancelled warrants of copper contracts on the London Metals Exchange, said Turnquist.

The LME describes warrants as documents that represent an entitlement to a specific lot of LME-approved metal. Cancellation of warrants implies that investors are taking copper out of the LME and "presumably" moving it to the Comex to take advantage of the price premium there, said Turnquist. On-warrant copper stocks on the LME fell to a nine-month low of 147,875 metric tons, Reuters reported on March 10.

Since February, the LME's on-warrant copper stocks have decreased considerably, said Sprott's Schoffstall. "While not all of this decrease is destined to the U.S., commodities traders that secure the physical metal have been rerouting copper to the U.S. to take advantage of higher prices."

U.S. prices for copper trade at a premium to the London Metal Exchange, with the value of copper on Comex rising faster than on the LME.

The closing price for the three-month copper contract Friday on the LME was $9,855.50 per metric ton. With about 2,204.62 pounds to one metric ton, that would represent a per-pound price of $4.47, compared with the $5.09-a-pound May contract settlement on Comex on Monday.

There's an opportunity for traders in arbitraging LME to CME copper-price spreads, Turnquist said. Arbitrage is the practice of simultaneously buying and selling an asset on different venues to profit from price differentials.

Schoffstall, meanwhile, said he expects copper miners to be the primary beneficiaries of higher copper prices, regardless of location.

At current prices, "copper miners have a health profitability, with an all-in sustaining cost of mining of $2.41 per pound," he said. "The difficulty in bringing new mines into production is supportive of higher prices over the long term as demand is expected to increase."

Schoffstall said that only four of the top 10 copper-producing companies are majority copper miners and publicly listed, and some of the largest producers may only derive less than 10% of their revenue from copper mining.

The Sprott Copper Miners exchange-traded fund COPP and Sprott Junior Copper Miners ETF COPJ provide investors with exposure to pure-play copper miners, he said. COPP's top holdings include Freeport-McMoRan Inc. $(FCX)$ and Teck Resources Ltd. $(TECK)$, while COPJ's includes Northern Dynasty Minerals Ltd. (NAK) and Taseko Mines Ltd. (TGB).

Pure-play miners, companies that are upstream in the supply chain, derive at least 50% of their revenue from the production of copper, so those would provide a "more targeted approach while decreasing unintended exposures," said Schoffstall.

-Myra P. Saefong

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March 25, 2025 08:10 ET (12:10 GMT)

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