Copper retreated from its all-time high this week, pressured by uncertainty over tariffs and the increase in U.S. interest rates. The decline comes amid an outlook characterized by significant price fluctuations—although prices are expected to remain elevated—and constrained supply, according to the conclusions of the latest expert summit held in China.
Copper prices fell sharply this week as traders factored the U.S. interest rate increase into their positions, along with expectations that the Donald Trump administration would, for the time being, refrain from imposing higher tariffs on the metal.
The decline followed concerns about a potential new escalation in the trade war, which had pushed prices to a record high the previous week. Once again, inventories became concentrated in the United States while warehouses in other markets—particularly
London—were depleted. This drove prices on the U.S. exchange above US$14,800 per metric ton for the first time.
However, as expectations shifted, inventories were repositioned and the price differential between New York and London narrowed. Copper subsequently fell to its lowest level in more than three weeks, finding support at around US$13,926 per metric ton, or approximately US$6.31 per pound.
Nevertheless, the 5.3% decline from its peak comes amid historically high price levels. Copper has gained 12% so far this year and nearly 40% over the past 12 months.
The factors behind these elevated prices are structural and long-term. “Market fundamentals are consistent with copper prices remaining historically high. They may not necessarily stay at their current level, but they are likely to remain elevated,” said Juan Carlos Guajardo, founder and executive director of Plusmining.
The former executive director of the Center for Copper and Mining Studies (CESCO), who also previously headed the Research Department at the Chilean Copper Commission (Cochilco), explained that mine production is expected to grow only marginally this year—“practically zero”—while consumption growth is likely to be closer to 2%.
“All of this is being supported by the expansion of power grids, electromobility and digital infrastructure,” he told Señal DF.
Guajardo’s analysis incorporates new insights from China, where he attended the 24th Antaike Copper Conference last week. Antaike is a leading metals research organization in a country that accounts for 60% of global copper consumption.
Guajardo summarized his price outlook as follows: “Under this scenario, I continue to see favorable conditions for high prices, but also considerable volatility.” He warned that geopolitical risks are driving the sharp price fluctuations, leading Asian experts to adopt a cautious stance.
“The Chinese believe that copper prices this year will be heavily influenced by the November elections in the United States. They assume that the U.S. government is making efforts to keep asset prices strong in general, so once the election is over, they question whether those levels will be sustainable.”
Tariffs add another layer of uncertainty, making it difficult to anticipate the direction of the market. “A potential U.S. decision to increase tariffs could significantly amplify price movements, both upward and downward.”
China prepares for copper shortages
The event, at which Guajardo also spoke, was held in Harbin, in northern China near Mongolia and Russia. Beyond the price outlook, what most caught his attention was the extent to which China has already accepted that it will face a world characterized by copper scarcity.
“There is a consensus that they are confronting a shortage scenario,” he explained. “Instead of complaining or looking for shortcuts or unconventional solutions, they are focusing on maximizing their resources in an environment of scarcity.”
The inability to dispense with copper has led China to develop a strategy focused on four areas.
The first is technology. According to Guajardo, a single Chinese company currently employs 350 PhD-level researchers working across the entire value chain, from exploration to finished products. One example of the results of this investment is the recent discovery of a copper and gold deposit in a volcanic basin—a geological setting previously considered barren.
The second area is smelting. Chinese smelters expect treatment and refining charges to remain depressed for an extended period. Once again, their response is technological: improving acid plants to recover more sulfuric acid—the by-product that has helped keep them financially viable—and increasing the recovery of minor metals.
The third area involves securing resources beyond China’s borders. Chinese companies Zijin, China Moly and Jiangxi are seeking to deploy capital and technology in other jurisdictions. In recent months, and largely away from the public eye, they have acquired the Cangrejos project in Ecuador and La Arena in Peru, while also obtaining the license to develop El Alacrán in Colombia. Africa remains a priority, but Guajardo also sees them turning their attention increasingly toward Central Asia, Kazakhstan, Uzbekistan and Pakistan.
The fourth area is familiar and revives longstanding concerns. China’s highest-ranking metals industry official warned at the conference that high prices are harming the industrial value chain and that substitution has become necessary. Copper has already been replaced in the piping industry and is also losing ground in air-conditioning equipment.
Implications for Chile
Guajardo believes Chile is currently in a “good position” to help supply these minerals. “From a commercial perspective, relations with China appear quite strong. Investment is a different matter and, as we know, may be subject to other considerations. But there is certainly no lack of interest; they will simply have to find the appropriate means and approach,” he concluded.
Source: Diario Financiero