On the London Metal Exchange, Chile’s main export fell nearly 3% to US$ 4.37 per pound. The US has already increased its copper inventories, so the downward trend could continue.
By C. Muñoz-Kappes
The spot price of copper on the London Metal Exchange (LME) fell nearly 3% on Wednesday, even before the final decision was announced by US President Donald Trump to impose a 50% tariff on the metal starting August 1. The price of Chile’s top export fell to US$ 4.37 per pound, a 2.92% drop from the previous day’s closing value.
Last night, following Trump’s announcement, US copper futures rose 2.5%, adding to the 13% increase seen Tuesday night when markets reacted to Trump’s “pre-tariff announcement.”
The gap between copper traded in London and that in New York is abnormal, but analysts say it reflects the fact that the LME focuses on production, while Comex reflects copper as a financial instrument. In any case, the market is awaiting more details to determine the final impact on the commodity.
The only clear signal markets received yesterday came from Trump himself, who emphasized that copper is strategic and vital for the US. However, tariffs will raise import costs, especially since the US is a net importer and mainly sources copper from Chile, followed by Canada.
According to Juan Carlos Guajardo, executive director of Plusmining, the role of copper in defense and technological advancement is evident. However, he said more details are needed—especially about which copper products will be affected and whether the tariff will be applied universally without exceptions. “Those details are key to understanding the scope of the measure.”
Regarding the market impact and the drop in copper’s value, Guajardo noted:
“There is an emerging view that when the tariff takes effect on August 1, as the US Secretary of Commerce said, prices will fall because the US will begin drawing from its accumulated copper stockpiles, reducing demand. I think the London market is anticipating that copper prices will start to fall as of August 1.”
$950.1 Yesterday’s exchange rate closing price—an increase of $8 from the previous day.
Further declines expected
Investment bank JP Morgan also predicts a further decline in copper prices. “The United States has imported copper equivalent to nearly one full year’s supply during the first half of 2025,” they noted, adding that purchases of the red metal will likely taper off as the opportunity to buy it abroad at prices that offset import costs—tariff included—is no longer viable. They also believe this will help replenish inventories on the LME, which is already happening and “will reduce LME spreads and cause a greater negative impact on copper prices on the LME during the rest of the year.”
Due to this situation, JP Morgan recommends caution with copper prices. They forecast that copper prices on the LME will drop to US$ 4.13 per pound in Q3 2025, before stabilizing around US$ 4.24 per pound in Q4.
The tariff hike increases the cost of importing manufactured goods into the US that require copper as an input for final production, according to a study by the Sonami mining trade association.
“This reduced demand will drive copper prices down,” Sonami stated. “However, it will also reconfigure global trade. Lower prices could incentivize increased demand for Chilean copper from Chinese manufacturers, which would help maintain production levels, albeit at lower prices.”
Chile mainly exports refined copper to the United States, largely sourced from the state- owned miner Codelco. However, the US still accounts for about 15% of total copper exports.
Suárez, Head of Research at LarrainVial, said that the scenario anticipated in their client report—released just hours before Trump’s confirmation—is now unfolding. He predicted that copper produced in Chile and Peru that no longer goes to the US will be redirected to other markets or to the London and Shanghai metal exchanges. He emphasized that the LME spot price, which is what global miners use to sell, will be crucial.
Exchange rate and fiscal effects
Suárez also projected that copper prices will depend on the future trajectory of the global dollar and the overall balance in copper markets. However, he warned that global and local conditions are now setting the stage for the Chilean peso to enter a depreciation trend.
He estimates the dollar could rise to $1,000 later this year. A lower copper price could impact Chilean government revenues, particularly due to the effect on Codelco.
Johannes Rehner, director of the UC Institute of Geography and researcher at the Millennium Nucleus for the Impact of China in Latin America, emphasized:
“If we look solely at refined copper, the US is the most important market. Refined copper exported from Chile comes mostly from Codelco. Codelco is a key contributor to the Chilean treasury. Any damage to its exports will have consequences for the entire country.”
According to Álvaro Merino, executive director of Núcleo Minero, a decline in copper prices will affect both foreign income and fiscal revenue.
“For every average cent that the copper price drops annually, Chile loses about US$ 120 million in export revenue, and the treasury loses about US$ 60 million due to reduced private mining taxes and lower surpluses from Codelco.”
Source: El Mercurio