Copper and Industrial Metals Face Headwinds Amidst Renewed Trade Uncertainty

Industrial metals, including copper and aluminum, recently experienced declines following news of potential additional tariffs of more than 10% on imports from any country associated with the BRICS bloc. This proposed fee, on top of existing tariffs, signals fresh uncertainty in global trade. Copper prices slipped, trading below $10,000 per ton, and other major LME metals also fell. This development coincides with the former US President's administration's plans to implement revised tariffs by early August, though some negotiations may extend beyond an initial July deadline. Despite recent economic shifts from efforts to reshape US trade, industrial metals have largely performed reasonably well, with copper benefiting from increased US shipments and lower global stockpiles, supported by a weaker US dollar.

The global copper market remains resilient, influenced by global tensions, supply constraints, and economic indicators. Recent military actions in the Middle East add an underlying support to copper prices despite daily fluctuations. Tightness in the physical copper market is also a significant price driver, evidenced by substantial warrant outflows and widening price spreads, indicating limited supply. Negative treatment charges for copper concentrate highlight a severe scarcity of mined copper. Federal Reserve officials' varying statements on interest rates contribute to market volatility, impacting the US dollar, investment flows, and economic growth prospects.

Copper prices are expected to hold above the $9,600/mt level, supported by supply issues and geopolitical risk premiums, even with seasonal demand weakness. Aluminum shows strength, while lead prices are stable. Zinc markets display resilience despite weakening consumption. The copper sector faces a significant supply crisis, with exchange inventories covering only about six days of global demand, well below historical averages. The demand side for copper is robust due to electrification trends, including data centers and renewable energy infrastructure. However, the supply response is hindered by long development times, averaging around seventeen years from discovery to production.

The outlook for copper suggests prices may need to rise significantly to incentivize new supply development. With depleted inventories and negative treatment charges, tightness is anticipated. Copper is approaching a key resistance level of $10,000 per metric ton.

Precious metals prices are driven by unique supply and demand factors. Gold functions primarily as a monetary asset, responding to real interest rates, central bank purchases, currency movements, and market uncertainty. Silver is a hybrid, influenced by both industrial applications (electronics, solar) and its monetary role, often moving with gold. Platinum Group Metals (PGMs) are largely industrial, driven by automotive demand and concentrated supply, with potential for substitution and future technology shifts.