US copper imports might double: Goldman Sachs

A potential Trump administration tariff on copper could swell American imports by 50% to 100% as traders race to buy the red metal and gain from price differences, investment bank Goldman Sachs says. 

Like the global duties on aluminum and steel that took effect on Wednesday, Trump could impose a global 25% tariff on copper by year end, analysts at Goldman Sachs said in a note this week. In late February, the U.S. president ordered an investigation into copper imports on national security grounds in what could be a first step towards potential tariffs.

The measure could result in a surge in imports and an increase of 200,000 to 300,000 tonnes in U.S. copper inventories by the end of the third quarter, the bank said. 

As of last week, Chicago Mercantile Exchange May contracts were trading $800 per tonne higher than their London Metal Exchange counterparts. That had widened by Wednesday when the LME cash settlement price was $9,628 per tonne or $4.37 per lb. while the CME May futures price was $10,707.56 per tonne or $4.86 per lb.

Copper deficit

According to Goldman, a higher copper price is projected to boost U.S. copper stocks from the current 95,000 tonnes to at least 300,000-400,000 tonnes by the end of the third quarter. This would account for 45-60% of global reported inventories, leaving very low copper inventories elsewhere, it added.

The bank also forecasts a 180,000-tonne global copper market deficit this year due to robust electrification demand, China stimulus and slower mine supply growth, expected to be concentrated in the second half of the year due to seasonal factors.

The bank predicts that LME prices will fall by $350 per tonne from September to December, narrowing the gap with CME prices so that importing copper into the U.S. is no longer as profitable.

Goldman Sachs expects LME copper to average $10,200 per tonne in the third quarter and says supply chain issues will mostly affect how copper prices differ between short-term and long-term contracts rather than pushing the overall price much higher or lower.