Trump's 50% tariff shocks the copper market! Morgan Stanley and JP Morgan predict that the price of copper in the United States will further decouple from the international market.

President Trump of the United States announced on Tuesday that a 50% tariff will be imposed on copper imported into the United States. In response to this news, copper futures on the New York Mercantile Exchange (COMEX) soared to historic highs on Tuesday, while the global benchmark copper price on the London Metal Exchange (LME) dropped. Trump later confirmed that the copper tariff will be implemented starting on August 1st. Both JPMorgan Chase and Morgan Stanley believe that the 50% copper tariff exceeds market expectations, and they expect premiums for COMEX and LME copper futures to further expand. The decoupling of copper prices between the United States and the international market JPMorgan Chase stated in a report that as of Tuesday, COMEX copper futures for delivery in September had risen by about 10%. The price difference between COMEX and LME copper futures has expanded to $2,400 per ton, approximately a 25% premium. Considering the market's clearer expectations regarding the 50% tariff level and implementation time, JPMorgan Chase expects COMEX copper futures prices to further rise, while LME copper futures prices will continue to fall, leading to an increase in the premium to 50%. JPMorgan Chase warned that with the level and timing of copper tariffs in the United States determined, international copper prices will enter a correction phase. Previously, due to US manufacturers stockpiling large amounts of copper ahead of time, the fundamentals of copper have become extremely tight. JPMorgan Chase is more cautious about LME copper prices for the remainder of this year, predicting that LME copper prices will fall to $9,100 per ton in the third quarter of 2025, then stabilize at around $9,350 per ton in the fourth quarter of 2025. Taking into account the situation of US manufacturers stockpiling ahead of time, JPMorgan Chase estimates that within 4 to 5 months after the imposition of tariffs, the import volume of copper in the United States will be relatively low. As of May 2025, the import volume of refined copper in the United States was 674,000 tons, an increase of 129% year-on-year. JPMorgan Chase estimates that the import volume of copper in the first half of 2025 in the United States may be around 850,000 tons (compared to a total of 905,000 tons in 2024), meaning that the import volume of refined copper in the first half of the year will be approximately 430,000 tons higher than normal levels. This is equivalent to about six months of normal copper import demand in the United States. JPMorgan Chase stated that as the United States is likely to undergo a continued destocking phase for several months (4 to 5 months) following the implementation of tariffs, the monthly 20-ton refined copper imports from Chile and other regions to the United States in recent months will likely be redirected to other regions globally, primarily in Asia. This will help alleviate the tight supply situation of copper outside of the United States, help replenish LME inventories, and bring greater downward pressure on LME copper prices for the remainder of this year. JPMorgan Chase also stated that while the threat to US scrap metal exports remains a medium-term bullish factor, the sharp increase in US copper prices may also prompt the United States to reduce its use of copper, posing a challenge to the growth in US copper demand, even as the electrification trend supporting copper demand continues. Morgan Stanley also believes that as the United States is a net importer of copper, a further decoupling between COMEX and LME copper prices is expected, with COMEX prices estimated to be approximately 50% higher than LME prices. Morgan Stanley believes that the 50% copper tariff exceeds market expectations, as previous spot prices showed that the price difference between LME and COMEX was close to 10%, averaging around 25% over a longer period of time. However, the significant stockpiles accumulated will mitigate the impact of the tariff in the short term. Which stocks are worth paying attention to? JPMorgan Chase analyzed the impact of US copper import tariffs on mining companies in another report. In high-yield (HY) mining companies, JPMorgan Chase believes that three companies are expected to benefit from higher US copper prices: First Quantum Minerals (FMCN) is a direct beneficiary of rising copper prices, although hedging restrictions in the short term have limited the increase in its EBITDA, profitability potential will be released as hedging expires in the second half of 2026 and the Zambia Kansanshi S3 smelter starts production; Hudbay Minerals (HBM.US) with assets in Nevada and Arizona makes it one of the main beneficiaries of tariff policies; Taseko Mines (TGB.US) with the Florence copper project in Arizona is expected to start production in the fourth quarter of 2025, with the US business accounting for approximately 60%. In investment-grade (IG) diversified mining companies, JPMorgan Chase believes that Freeport-McMoRan Copper & Gold (FCX.US) is the biggest beneficiary of rising US copper prices, with about 75% of its revenue coming from the copper business and owning the largest copper mine in the United States, the Morenci mine in Arizona. However, JPMorgan Chase emphasizes that Teck Resources (TECK.US) has no direct sales to the US, while Glencore (GLNCY.US), BHP Group Ltd Sponsored American Depositary Receipt Repr 2 Shs (BHP.US), and Anglo American Plc Sponsored ADR(NGLOD.US) have limited exposure in copper business, resulting in a smaller impact from US copper tariffs on these giants. Morgan Stanley also believes that Freeport-McMoRan Copper & Gold is the biggest beneficiary of potential US copper tariffs, with approximately one-third of the copper sold by the company coming from the US and sold to US customers through contracts linked to COMEX. The stock price performance of Freeport-McMoRan Copper & Gold is expected to outperform other similar companies. Morgan Stanley also pays attention to Southern Copper Corporation (SCCO.US), with approximately 40% of its contracts linked to COMEX contracts. This situation is not likely to last long, as many customers may renegotiate annual contracts in the future and switch to using LME pricing.