The Emerging Copper Premium: Policy Risk Meets Physical Scarcity

Key Takeaways

• Trump Tariff Shock: Trump’s proposed 50% copper tariff sent U.S. copper prices up 13% in a day, creating a record 27% premium over global prices.
• Copper as a Strategic Metal: Copper is now treated as a national security asset, vital to defense, energy and AI infrastructure.
• Copper Market Fragmentation: Global copper markets are breaking into regional silos due to tariffs, sanctions and inventory mismatches.
• Structural Supply Deficit: Copper's structural supply deficit is deepening due to long mine lead times and rising demand.
• Investor Tailwinds: We believe U.S. copper will likely trade at a sustained premium, favoring producers, especially those with U.S. assets.

Performance as of June 30, 2025
Average Annual Total Returns*

*Performance for periods under one year is not annualized.
Source: Bloomberg as of 06/30/2025. You cannot invest directly in an index. Past performance is no guarantee of future results.

Performance Overview: Tariff Triggers Historic Copper Price Dislocation

U.S. copper prices (COMEX futures) surged to record highs this month after U.S. President Donald Trump’s July 8 announcement to impose a 50% tariff on all copper product imports under a Section 232 national security investigation.⁷ The market reacted immediately, with U.S. copper jumping more than 13% on July 8, climbing from $4.98 to $5.65 per pound to set a new all-time high (Figure 1). According to FactSet, this price move represented copper's largest single-day gain since 1968. Trump's announcement caught the market off guard, which had expected a 25% tariff at most, and as of July 7, had priced in the impact of just a 12% tariff.

The 50% tariff surprise triggered copper’s sharpest rally in decades.

The dislocation between U.S. copper and global copper, commonly tracked by the copper price on the London Metals Exchange (LME), has reached unprecedented levels. The U.S. copper premium over LME copper widened to a record 27%, representing a new high (Figure 1). By comparison, over the past five years, the arbitrage premium between U.S. and LME copper has averaged less than 1%; even the May 2024 short squeeze had only briefly driven it to 8% (Figure 2). This premium may steepen further if the 50% tariff is enacted (this would imply a $6.70 U.S. copper price).

Figure 1. U.S. Copper (COMEX) Hits a Record Premium Over LME (2020-2025)

Figure 2. U.S. Copper (COMEX)-LME Copper Spread (2020-2025)

Source: Bloomberg. Data as of 07/15/2025. COMEX Copper is represented by the front-month standardized contract on the CME, ticker HG1. LME Copper is represented by the LME Copper 3 Month Rolling Forward, Bloomberg ticker LMCADS03.

Copper’s early July breakout built on strong performance in June. U.S. copper prices¹ rose 7.54% for the month, and both copper miners³ and junior copper miners⁴ gained approximately 10%. In the first six months of the year, junior copper miners disproportionately benefited from the recent policy actions and gains in the copper spot price, climbing 32.45% versus 12.24% for senior copper miners. The copper rally has been supported by tightening fundamentals, a weakening U.S. dollar and growing anticipation of policy-driven supply realignment. Trump’s July 8 announcement further accelerated these dynamics and catalyzed a structural repricing of U.S. copper.

Looking at longer-term performance, copper and copper miners have meaningfully outpaced equities and broader commodity benchmarks over the past five years (Figure 3).

Figure 3. Physical Copper and Copper Stocks Have Outperformed Other Asset Classes Over the Past Five Years (6/30/2020-6/30/2025)

Source: Bloomberg and Sprott Asset Management. Data as of 06/30/2025. Copper Miners are measured by the Nasdaq Sprott Copper Miners™ Index (NSCOPPT index); U.S. Equities are measured by the S&P 500 TR Index; the Copper Spot Price is measured by LMCADY Comdty; and Commodities are measured by the Bloomberg Commodity Index (BCOM). Definitions of the indices are provided in the footnotes. You cannot invest directly in an index. Past performance is no guarantee of future results.

Sprottlight

Copper’s Strategic Shift: Cyclical Commodity to National Security Asset

Trump’s decision to launch a Section 232 national security investigation⁸ into copper and his statements on implementing a 50% tariff on copper product imports mark a major shift in how policymakers view copper. Once treated purely as an industrial input, copper is now being reframed as a strategic material essential to defense, grid reliability, artificial intelligence and economic resilience.

If implemented, the 50% tariff would be one of the most significant trade actions on copper in history. While copper prices surged on the news, the policy signal may be more significant. Copper has entered a strategically important policy space. This development reflects rising geopolitical concern over national resource access and a growing willingness to intervene in markets to shape industrial outcomes. The policy direction is clear, even if the final tariff rate is adjusted or delayed.

A global scramble is underway for materials vital to energy and defense.

Copper is increasingly viewed as a strategic asset, prompting a new wave of policy interventions and global resource competition. The U.S., China and the EU are treating copper and other critical materials as tools of national power, using stockpiling, financial incentives and trade policy to secure long-term supply. China holds a clear lead, having spent decades building out its refining capacity and forging strategic sourcing relationships worldwide. Today, it dominates production across many critical minerals, including copper (Figure 4). In response, the U.S. is moving to reduce its dependence on China and boost domestic self-sufficiency, while the EU is pushing forward with plans to establish strategic mineral reserves to counter mounting geopolitical risks.⁹ For copper, these actions amplify an already significant supply deficit and accelerate the drawdown of global inventories.

This growing fragmentation is part of a broader geopolitical realignment. Copper is being pulled into the same national security and industrial sovereignty frameworks that have shaped U.S. policy on energy, semiconductors and rare earths. Section 232 is only one part of this story. The deeper trend is a global race for physical control over the materials that underpin surging global energy needs and defense infrastructure.

Figure 4. China’s Dominance: 2024 Refined Critical Material Production by Country

Source: “Global Critical Minerals Outlook 2025”, International Energy Agency (IEA), May 2025. 

Copper’s Structural Supply Chain Weakness

The U.S. copper supply chain is structurally exposed. In 2024, U.S. refined copper consumption totaled 1.6 million metric tons, but domestic production covered only 890,000 metric tons.¹⁰ That left nearly half of the U.S. demand dependent on imports.

The proposed 50% tariff seeks to address this imbalance by creating a price umbrella, a domestic premium that makes upstream and midstream investment more attractive. The idea is to use trade friction to redirect capital toward the U.S. copper supply chain.

Copper’s long lead times ensure structural scarcity will likely persist.

However, copper is not a quick-turnaround industry. On average, it takes 17 years for a copper mine to go from discovery to first production (Figure 5).¹¹ Further, copper mines that were expected to go online in the next five years were discovered 20-30+ years ago. While the Trump administration has promised to streamline permitting, meaningful new supply will take time, and the near-term effect will likely be tighter availability.

Substitution options are limited. Aluminum, while often cited as an alternative, offers only two-thirds the conductivity of copper and is subject to the same 50% tariff. For U.S. manufacturers, that means fewer choices. Therefore, copper miners with U.S. assets may be well positioned to benefit from this emerging new order.

Figure 5. Copper Mine Lead Times Continue to Trend Longer (1995-2035)

Source: From 6 to 18 years: The increasing trend of mine lead times, S&P Global. April 3, 2025

Pricing Fragmentation and Policy-Driven Arbitrage

Copper has historically traded with tight alignment across exchanges. The announcement of the Section 232 tariff triggered a sharp divergence in regional prices, with the COMEX-LME arbitrage surging past 28%. The spread could widen if the tariff is fully implemented at 50%.

Beneath this price dislocation lies a deeper structural issue: the fragmentation of the global copper inventory system. Since February, U.S. copper imports have spiked in anticipation of the tariff, pushing COMEX-registered inventories to a seven-year high. However, the U.S. is a small fraction of global copper demand, and this has come at the expense of the rest of the world, where copper in the LME and SHFE has declined significantly (Figure 6). LME stocks have tightened, and a large portion of what remains is of Russian or Chinese origin, which many Western consumers are reluctant to purchase.

Copper’s global market is fracturing, and regional prices now reflect policy, not just supply and demand.

Compounding the problem, only about 3% of LME copper tonnage meets CME deliverability standards. This makes inter-market rebalancing difficult, even in normal conditions, and nearly impossible in today’s environment of sanctions, tariffs, and specification mismatches. The result is a copper market that no longer clears smoothly across regions, but instead behaves like a series of siloed ecosystems, each governed by its own trade rules, inventory dynamics, and political pressures.

These dynamics are further inflamed by U.S.-China competition for physical supply. China is drawing down inventories and ramping up concentrate imports to feed its dominant smelting base, while also continuing to exert influence over midstream pricing through export controls and stockpiling. The U.S., meanwhile, is now moving to greater stockpiling and incentivizing domestic copper production.

What’s emerging is a traditional supply shortage and a global system in which copper doesn’t easily move from surplus to deficit regions. Logistical friction, policy asymmetry and strategic behavior are driving persistent regional premia, transforming price dislocations from short-term arbitrage opportunities into structural features of the market.

Figure 6. Copper Inventories are Falling Outside the U.S.

Source: Bloomberg. Data as of 06/30/2025. Includes inventories on the LME, SHFE, and COMEX.

Implications for Market Structure and Investment

Whether the 50% tariff proceeds in full or is eventually diluted, copper is now part of a broader global trend: the fragmentation of critical materials markets. U.S. copper will likely trade at a sustained premium over global benchmarks, reflecting supply risk.

This presents a complex environment for consumers, but a constructive one for upstream producers. Tariffs are building a structural price floor. Regulatory momentum around reshoring and resource security is accelerating. Unlike demand-side incentives, which have weakened in the U.S. under the “One Big Beautiful Bill”, supply-side support is gaining political traction.

More broadly, this shift redefines how copper is valued. Global price discovery is no longer purely economic. Instead, access, reliability and alignment with policy goals are becoming embedded in the market.

Looking Ahead

The next major milestone for copper markets is August 1, the date President Trump has identified for implementing the proposed 50% tariff on copper product imports under Section 232. Until then, traders will continue to assess whether the policy is delayed or scaled back. The tariff’s size and scope remain a dominant near-term driver of U.S. copper pricing.

If enacted, arbitrage flows may slow or stop, pressuring LME pricing and reinforcing a sustained premium for U.S.-delivered copper. While follow-through is yet to be seen, the policy trajectory remains clear.

Copper’s trajectory now hinges on trade policy, not just supply and demand.

Beyond Section 232, the broader trade agenda remains highly fluid. Trump has recently imposed or threatened tariffs on a wide range of U.S. trading partners, including 25–40% on countries like Japan, South Korea, Vietnam, and Brazil, and up to 35% on Canada. These actions, many of which are tied to broader energy, technology, and manufacturing supply chains, carry indirect implications for copper demand, especially if retaliatory measures occur.

China’s ongoing scramble for copper concentrate and continued strategic stockpiling suggest the competition for copper units will remain intense. Despite a brief surge in U.S. inventories, copper's physical tightness continues to support the outlook for sustained regional premia.

Finally, while the One Big Beautiful Bill has weakened demand-side incentives in the U.S., the structural supply deficit remains in place. Mine disruptions are running around 5.5%, treatment charges are significantly negative, and long-term demand from electrification, data centers and grid infrastructure shows few signs of slowing.

Copper is entering August with political catalysts, physical friction and strategic competition all converging. 

Figure 7. Copper Supply and Demand Imbalance Likely to Grow (2023-2050E)

Source: BloombergNEF Transition Metals Outlook 2024. The line represents demand and the shaded area represents supply. Demand is based on a net-zero scenario, i.e., global net-zero emissions by 2050 to meet the goals of the Paris Agreement.

Footnotes