U.S. tariffs on copper, if imposed, are unlikely to significantly impact imports but could drive a persistent premium in domestic prices, benefiting U.S. producers such as Freeport-McMoRan.
Since the U.S. election, the spread between Comex and LME copper futures has widened, with the Comex premium averaging about 5% (20 cents per pound) since November 2024, expanding to 7% (30 cents per pound) in the spot market, the bank said.
UBS said it sees little economic rationale for copper tariffs, which would likely raise costs for U.S. consumers without spurring major investment in domestic mining or smelting. However, tariffs could sustain a Comex premium, benefiting domestic producers of refined copper.
The U.S. imports about 800,000 tonnes of refined copper annually, accounting for roughly 50% of domestic consumption. A potential restart of the 200,000-tonne Hayden smelter and increased production at Rio Tinto’s Garfield smelter could reduce but not eliminate reliance on imports, UBS said.
In mining, UBS noted that permitting, rather than economics, is the main constraint on increasing domestic copper supply, meaning tariffs are unlikely to drive significant investment in new U.S. mines.
The U.S. is a net exporter of copper concentrate and scrap but imports refined copper and semi-fabricated products. UBS said tariffs could shift scrap flows, boosting domestic processing while limiting imports, which could pressure refining margins.
Despite near-term risks from elevated speculative positioning, UBS remains positive on the copper market’s fundamentals, citing constrained mine supply growth and strong demand. Its top copper stock picks are Antofagasta PLC (LON:ANTO), Anglo American PLC (LON:AAL), and Freeport-McMoran Copper & Gold Inc (NYSE:FCX).
