[Christian Harris]

Copper futures surged to $4.6 per pound on Wednesday, February 26, 2025, outpacing gains in other base metals following President Donald Trump’s announcement of an investigation into potential tariffs on copper imports.

This move is seen as part of a broader strategy to reinvigorate domestic copper production and counter China’s growing influence in the global copper market.

The investigation reflects the critical importance of copper in various industries, including electric vehicle manufacturing, military equipment, and consumer electronics.

With the United States currently importing about 45% of its copper needs, the potential tariffs could significantly reshape the global copper trade landscape.

This development comes at a time when the copper market is already facing complex supply and demand dynamics.

However, supply growth remains constrained due to years of underinvestment in mining capacity.

S&P Global predicts that global copper mine production from currently operating assets will peak at 23.5 million tons in 2025-2026 before declining at an average rate of 2.3% per year through 2035.

This supply constraint, coupled with growing demand, could exacerbate the upward pressure on prices.

Interestingly, while global supply tightens, copper inventories in China have been rising.

Stocks have increased to over 260,000 tonnes, triple the level at the start of the year, while bonded stocks have doubled to 33,000 tonnes.

This localised abundance in China contrasts with the global supply concerns and highlights the complex geopolitical factors at play in the copper market.

As the investigation unfolds, market participants will be closely monitoring its potential impact on global trade flows, pricing dynamics, and investment decisions in the copper industry.

The outcome could have far-reaching implications for the global copper supply chain and the ongoing shift towards renewable energy and electrification.

Source: Trading Economics

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[Leonardo]

Here’s why my head is at:

• Momentum trading: The sharp rise in copper prices could attract momentum traders looking to ride the upward trend. But we need to be cautious of potential pullbacks as the market digests the news.
• Volatility plays: With increased uncertainty, options strategies might be more attractive for those looking to profit from price swings without taking on excessive directional risk.
• Spread trading: The widening Comex-LME spread, which hit a record high of $753/mt, maybe offers opportunities for arbitrage or spread trading strategies.
• Short-term overbought conditions: With copper prices reaching new highs, we traders should be alert for posible short-term overbought conditions that could lead to quick pullbacks.
• Sector rotation: The focus on copper might lead to rotation within the wider metals sector. Should we look for opportunities in related metals or mining stocks that might benefit from spillover effects?

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