The copper price outlook is promising, but Trump’s potential anti-green policies and high tariffs on China could muddy the waters. Experts warn that such measures would create uncertainty, slowing the previously strong growth in copper demand.
By Marina Parisi
In October 2024, Deutsche Bank announced a sustained copper deficit from 2025 and a price uptrend over the next 12 months. This generated great enthusiasm among producers and investors. However, could there be room for error? Consider the lithium market—once expected to stabilize at high prices, it has plummeted by over 80% in the last two years, dropping from $70,000 per ton to $10,000 per ton.
Francisco A. Soto, General Manager of Empírica Consultores, attributes lithium’s decline to a sharp increase in supply from China and unanticipated adjustments in demand. “Regarding Deutsche Bank’s copper forecast, I agree, but before Trump’s election,” notes Gustavo Lagos, Honorary Professor at PUC’s Mining Engineering Department. “Copper supply projections were reasonable and optimistic prior to Trump’s victory. However, the ‘Trump effect’ caused a 40-cents-per-pound drop after his win.”
“Trump’s election changes the optimistic scenario envisioned for the copper market,” Lagos adds. “It remains to be seen what policies he will implement; for instance, high tariffs on Chinese goods are highly questionable due to their negative consequences for both the U.S. and China.”
Juan Cristóbal Ciudad, Senior Market Analyst at Plusmining, offers a different perspective.
“Our projections align with Deutsche Bank’s, anticipating growing physical market deficits in
the coming years.”
From 2025 and 2026, Ciudad expects deficits of 20,000 and 160,000 tons, respectively, deepening further in 2027 and 2028. “These forecasts hinge on limited supply expansion, as few new projects will come online in the next few years,” he explains. “Meanwhile, demand is expected to rebound, driven by new applications and uses for copper, especially in the latter half of this decade. We project a 2% increase in copper prices for 2025, compared to the 2024 average of $4.15 – $4.16 per pound.”
Unforeseen Variables
Deutsche Bank’s forecasts are not bulletproof, confirms Arturo Alba, Director of Industrial Engineering at the Universidad Adolfo Ibáñez (UAI). “Price projections for commodities are inherently complex and prone to error, as seen with lithium,” he explains.
Despite expectations of rising copper prices, Alba advises caution, citing geopolitical factors, local conditions affecting major producers, and speculative actions that have historically caused abrupt inventory fluctuations. “Refined copper’s low inventory levels make the market highly sensitive to minor supply and demand changes, significantly impacting price projections,” adds Ciudad.
Soto also highlights potential adverse variables. “Factors like a global economic recession, slower energy transition, or the emergence of substitutes such as aluminum could alter the outlook,” he says. Technological advances could also reshape copper demand. For instance, electric vehicles may require less copper due to improved efficiencies, while wireless technologies and more efficient sodium-based batteries could reduce copper dependence.
On the supply side, Soto points to recycling as a key factor, along with automation and intelligent technologies that could lower production costs and boost efficiency, impacting supply and prices.
The Trump Effect
What can we expect from the “Trump effect”? “We anticipate intensified trade tensions between the U.S. and China, including higher tariffs,” Ciudad predicts. “In response, China may introduce new measures to stimulate its economy, potentially increasing copper demand.”
Lagos, however, envisions a less optimistic scenario. “China’s stimulus measures were sufficient to boost copper demand for green applications before Trump’s win. Now, Trump’s trade war, which aims to disadvantage China, adds uncertainty. His announced anti-green measures would negatively impact electric vehicles and renewable energy, reducing copper and lithium demand.” Soto agrees, suggesting that Trump’s arrival could exacerbate U.S.-China trade tensions, significantly affecting the copper market. “His protectionist policies, including tariffs on Chinese goods, would disrupt global supply chains, creating uncertainty in commodity markets, including copper.”
This could strongly impact Chile, as China accounts for 50% of global copper demand. “A Chinese economic slowdown from trade restrictions could reduce copper consumption, lowering prices and dampening investor confidence in infrastructure and manufacturing in China,” warns Soto.
However, not all is bleak. Soto believes that the U.S. and its allies might implement protectionist policies to strengthen strategic industries like mining, reducing dependence on China. This could increase copper demand in North America and Europe, though unlikely to offset a potential contraction in China in the short term.
Argentina on the Offensive
Argentina’s 2024 announcements drew industry attention. President Javier Milei’s administration unveiled the “Filo del Sol” mega-project near the Chilean border. With annual production projections of 66,000 tons of copper, 168,000 ounces of gold, and 9.25 million ounces of silver for 50 years, this site could rival Chile’s largest mines. Strategically located in San Juan Province, 140 kilometers southeast of Copiapó, Filo del Sol will be operated by Lundin Mining in partnership with BHP. Former Argentine Mining Undersecretary Mario Capello notes that Chile’s expertise and logistics will be vital for the project’s success, particularly for Pacific export routes.
Argentina’s efforts to join global mining ranks also rely on the RIGI law (Regimen of Incentives for Large Investments), promising legal and fiscal stability for 30 years. While this makes Argentina more attractive for investors, challenges like political and economic instability persist.
Chile’s Strategic Response
Should Chile follow Argentina’s example to bolster foreign mining investments? Arturo Alba advises prioritizing regulatory stability, streamlined permits, tax incentives, and technological innovation. “Constructive community dialogue and clear environmental policies could enhance Chile’s appeal as an investment destination,” he adds.
The latest Cochilco report, “Investment in Chilean Mining: Project Portfolio 2024-2033,” outlines 51 projects worth over $83 billion. Alba stresses the importance of turning this potential into reality. Meanwhile, Lagos criticizes recent Chilean governments for neglecting the mining sector’s needs. “Energy costs in Chile remain 20% higher than in Peru, our main competitor,” he notes.
Soto underscores the urgency of exploring new copper export markets amid global uncertainties. Chile must prepare for Trump’s moves while leveraging opportunities to strengthen its mining industry and maintain its global leadership in copper exports.
Source: Nueva Minería