The United States consumes roughly 6% of global copper, yet now holds nearly 70% of the copper stored across major global futures exchanges: the London Metal Exchange, COMEX, and the Shanghai Futures Exchange. Ole Hansen, Saxo Bank’s Head of Commodity Strategy, argues that this unusual concentration is largely driven by expectations of America imposing tariffs on imported refined copper.
Traders have been moving copper into the U.S. ahead of a possible tariff because metal already inside the country could become more valuable if duties are introduced. This comes after the U.S. Commerce Department proposed gradually increasing tariffs, although the final decision remains pending.
At the same time, strong Chinese demand, particularly from the country’s expanding energy-transition industries, is keeping pressure on copper supplies elsewhere. The result is a growing imbalance between the U.S. and other markets.
Hansen warns that some of the copper shipped into America could remain there for an extended period. This would effectively reduce the amount of metal available to other regions and contribute to tighter global supplies.
The LME has also shown signs of short-term physical tightness. Copper for immediate delivery recently traded significantly above the three-month contract, creating a steep backwardation. However, Hansen believes this does not necessarily signal a massive shortage.
Much of the price difference may be linked to traders covering positions ahead of the delivery period rather than a shortage involving millions of tons.
Longer term, increasing copper supply remains difficult. Mining companies face declining ore grades, higher energy and production costs, and long development periods for new mines. One of the leading producers of copper globally, Chile, is experiencing weaker output. Building new mines is expensive and can take years, making rapid increases in supply difficult even when prices are high.
The copper situation contrasts with gold and silver. Copper is facing physical scarcity because it is heavily consumed by industry, including energy infrastructure and technology. Gold, by comparison, is increasingly being accumulated as a financial and monetary asset, particularly by central banks and investors seeking protection against economic and debt-related risks.
Hansen remains bullish on gold if economic uncertainty, debt concerns and geopolitical risks persist, while he is more cautious about silver at elevated prices because of its strong dependence on industrial demand. Overall, the copper market is being shaped by a combination of tariff expectations, strong Asian demand, limited mine expansion and the unusual concentration of inventories in the United States.
Unless the tariff threat fades or American copper begins flowing back into global markets, supplies outside the U.S. could remain tight.
For entities like New Pacific Metals Corp. (NYSE American: NEWP) (TSX: NUAG) focused on exploring for and developing silver resources, the current macroeconomic and geopolitical picture around the world could draw more interest as investors seek to diversify their holdings.
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