What happened with the copper price in Q1?

After setting a new record high above US$5 per pound in May 2024, the copper price spent most of the second half of the year within the US$4 to US$4.50 per pound range.

Copper began 2025 on a rebound, climbing from a low of US$3.99 per pound on January 2 to US$4.40 by mid-month. It then eased slightly, ending January at US$4.25 per pound.

February once again saw momentum in the copper markets as prices climbed steadily to US$4.76 on February 13. However, the price retreated and ended the month at US$4.53 on February 28.

The copper price saw significant gains throughout March, breaking through the US$5 mark on March 19 and climbing to set a new all-time high of US$5.22 on March 26, before falling to US$5.04 on March 31.

Since then, the copper markets have been under pressure, causing the price of the red metal to plunge to US$4.26 on April 7.

The effects of tariffs on copper

The first quarter was dynamic for copper, but few factors have influenced the market more than the implied threat of tariffs from the US. These threats have created a wider price gap between the London Metals Exchange (LME) and the Chicago Mercantile Exchange (CME).

With import fees applied to steel and aluminum in early February, and CME prices were 10 percent higher than those on the LME, traders began shifting copper inventories from overseas warehouses into the US to capitalize on a US$1,200 per metric ton premium in the US market.

Traders have elevated stockpiles at CME warehouses to over 100,000 metric tons, the highest level since they peaked at 250,000 metric tons during Donald Trump’s first presidency.

Overall, the US relies on imports, which account for 45 percent of its domestic consumption. Chile constitutes 35 percent of the incoming supply, while Canada contributes 26 percent.

The majority of copper inflows are in the form of refined copper products, which make up 60 percent of US imports.

On February 25, President Trump signed an executive order invoking Section 232 of the Trade Expansion Act to initiate an investigation into the impact of copper imports in all forms on national security.

In the order, Trump noted that while the United States has ample copper reserves, its smelting and refining capacity has declined. China has become the world’s leading supplier of refined copper, commanding a 50 percent market share.

During CRU’s webinar, "Copper’s Critical Juncture," on March 13, CRU’s Head of Base Metals Supply, Erik Heimlich, discussed why Trump may have announced the start of the investigation.

“Their reliance on imports has been growing systematically, and with the closure not so long ago of the Hayden smelter in the Amarillo refinery, that has increased even more,” he said.

Heimlich further explained that concerning copper tariffs, Trump may be using them to encourage a resurgence of copper processing in the US based on national security concerns.

It was a point reiterated by Bryan Billie, Policy and Geopolitical Principal at Benchmark Mineral Intelligence, during the Copper in the Crosshairs virtual panel held on April 3.

“The big question here is whether US dependencies on copper imports are supposedly compromising national security. That’s the legal rationale behind the investigation,” he said.

Billie also discussed the timelines, noting that these investigations typically take 270 days to complete, although they can be shorter. While it remains uncertain whether the investigation will lead to tariffs, it could also result in export controls, which might pose additional challenges in global copper markets.

Benchmark’s Head of Strategic Initiatives, Michael Finch, suggested that the review would take weeks rather than months and could actually bring some relief to the market.

“I think, given that the market now expects the announcement on Section 232 to arrive a bit sooner than previously anticipated, I don’t believe as much copper will be trapped in the US as we progress through the coming quarters… I think it's part of that trend that we’re witnessing a softening in the copper price,” he said.

Supply chain disruptions, fundamentals drive copper prices

Other factors that have affected the price include a major power outage in Chile at the end of February.

Chile declared a state of emergency to address the outage, which left more than 8 million homes and a significant portion of the country’s mining operations without power.

The outage resulted from a transmission line failure in the northern part of the country, causing BHP (ASX:BHP,NYSE:BHP) to shut down operations at Escondida, the world’s largest copper mine.

Although power was restored in a few days, COMEX copper futures for March rose by 0.9 percent.

Additional supply disruptions occurred in March when Glencore (LSE:GLEN,OTC Pink:GLCNF) declared a force majeure and halted copper shipments from its Altonorte operation in Chile. The refinery produces 350,000 metric tons of copper anode annually.

Even though the facility produces only a fraction of global refined copper, a prolonged shutdown could significantly impact an already tight copper market.

On a fundamental level, the International Copper Study Group (ICSG) provided preliminary data for January’s supply and demand conditions on March 21.

In its release, the group stated that the refined copper balance indicated an apparent deficit of 19,000 metric tons in the first month of the year, down from the 24,000 metric ton deficit reported in January 2024.

Other data shows that supply and demand for refined copper maintained a balance at the start of the year, with each growing by 1 percent. However, supply-side growth was largely constrained by a 14 percent drop in Chilean output.

Mine production experienced a 2 percent increase in January, with a 7 percent year-over-year growth from Peru, with the ramp-up of production at Anglo American’s (LSE: AAL,OTCQX:AAUFK) Quellaveco was identified as a key factor.

Additionally, supply increased by 6 percent in the Democratic Republic of Congo due to the expansion of Ivanhoe’s (TSX:IVN,OTCQX:IVPAF) Kamoa-Kakula mine.

Meanwhile, a 3 percent increase in Asian production was offset by a 2 percent decline in North America. Chile also saw a decline of 2.7 percent compared to the same period last year.

What can be expected for the rest of the year?

As recently as March, economists were still predicting overall GDP growth and an increase in demand for copper products.

“CRU economists continue to expect global GDP to grow by 2.6 percent in 2025 and refined copper demand to grow by around 2.9 percent in both this and next year, which is actually an increase compared to our previous forecast. So, despite the dramatic macro and geopolitical events that we have witnessed over the last few months, the base case demand narrative for copper remains robust,” Heimlich said at the time.

He also noted that this was a base-case scenario surrounded by uncertainty.

That uncertainty has come to the forefront at the start of Q2. Copper prices fell nearly 20 percent at the beginning of April as the Trump administration announced a new round of base-level and reciprocal tariffs.

Investors experienced a significant sell-off as the prospect of a recession became more pronounced.

A recession would substantially impact base metal markets, including copper, as consumers turn away from big-ticket items like new homes and cars, which require large quantities of these materials

For investors, uncertainty will likely remain for some time. A finding on Section 232 could help stabilize copper prices, or it could escalate other aspects of a trade war between the US and the rest of the world.

It also remains unclear how long Trump’s tariffs will be in place.

This situation could provide opportunities for investors with an appetite for risk who are looking to bet on stocks that suddenly have value. Others may prefer to remain on the sidelines and wait for more clarity on the global trade front.