US import tariffs on copper have sparked competition in copper demand for half a year already
The copper price rose sharply in the past half year, approaching a historic high above $10,000 per ton. Geologically, there is no shortage of this raw material. However, developing a new project for copper extraction takes an huge amount of time and money. Today, there appears to be sufficient copper available globally to meet the steadily growing demand. But how is that possible, and what does it mean for investments in our energy infrastructure? The Netherlands Materials Observatory (NMO) looked into this on behalf of the government. The conclusion: there is currently a sufficient supply of copper in the world but be prepared for fluctuating prices and more uncertainty due to strong competition on the global market. US import tariffs on copper, announced in February and imposed in July, are the determining factor here for now.
The price increase is partly due to the US purchasing copper from Asia (especially China) and Europe in anticipation of new, higher import tariffs and to guarantee future availability. At the same time, exports of copper scrap to China declined, causing the total copper supply in China to fall short of expectations. As a result, copper stockpiles in China decreased, in April even by 55 thousand tons per week. Globally, however, there has been no decline in supply; copper production remained steady. Copper smelters around the world tried to attract more copper concentrate or copper scrap to their industrial facilities by charging negative processing fees, essentially paying for processing , in order to keep production capacity optimal.
While inventories in China decreased, the amount of copper traded on the American COMEX exchange increased significantly. It reached its highest level since 2018. Traders took advantage of the price difference of sometimes up to $1,600 per ton between the London and New York exchanges to speculate and make a profit. That strategy now takes on a political dimension: President Trump officially announced a 50% import tariff on copper on July 9, effective as of August 1. In preparation for that, traders in the US increased copper inventories to the maximum. The US is also highly dependent on copper imports (particularly from South America).
What does this mean for the Netherlands?
Although copper theoretically remains available to Dutch companies, the increasing competition between China and the United States is causing movement in the market. The copper price is rising, and raw materials such as copper scrap and copper concentrate are less readily available. This affects, among others, Dutch companies that have their own smelting capacity or are directly dependent on primary copper metal.
Copper is a traded commodity, which means copper can be purchased for future delivery and price. This helps hedge against price fluctuations but also creates room for speculation on the future balance between supply and demand and the future price.
As long as global supply and demand remain in balance, risks are limited. But persistent geopolitical pressure can lead to further price increases and more uncertainty. It is therefore wise for companies to prepare for this, for example with strategic inventories or hedging against price volatility. The demand for copper has been increasing for decades and will continue to rise. This requires new production, with new projects needing a great deal of time and money before contributing to copper supply.
Well prepared
To be well prepared, monitoring the raw materials market remains essential. The NMO collects and shares up-to-date knowledge about developments in that market with governments and companies. In addition, the Ministry of Economic Affairs is investigating whether copper should be included in a national raw materials reserve. In this way, the Netherlands remains strategically agile in an increasingly competitive market.
Want to know more? Read the answers (in Dutch) to the parliamentary questions about the supply of critical raw materials from China.