A couple of weeks after President Trump announced that basic copper imports would be exempted from tariffs, major electrical wire makers in America have begun increasing their prices, suggesting that consumers may face higher costs despite a sharp decline in metal prices.
In his announcement, Trump clarified that the 50% import tariff would be imposed only on manufactured goods that contain copper like cables and wires, not unprocessed refined copper as many expected.
Data released by the federal government shows that prior to the announcement, domestic prices for copper cable and wire had surged greatly, with copper imports slated for delivery before August 1st also increasing. While the clarification means that copper wire and cable producers will pay significantly less for copper purchased, it also means that global competitors exporting their products to America will end up paying more.
Despite this, major producers of copper wire and cable like Cerro Wire LLC and Southwire Company LLC recently announced 5% increases in prices for a range of copper wire products. This move demonstrates how low-profile firms that own copper-processing plants in America may be the main beneficiaries of Trump’s unexpected tariff exemption.
Figures from last year show that over 800,000 tons of unprocessed copper was imported into the country, making up 45% of total consumption. 20% of cable demand in the country was also met by imports.
Analysts argue that up until America’s copper processing infrastructure grows, additional costs to the numerous goods that contain copper imported annually into the country will likely be passed on to consumers, despite the significant decline in domestic prices for the red metal itself.
CRU Group’s Aisling Hubert states that new capacity for low-voltage cable can be set up in the short-term, but this won’t be possible for cable imports. She explains that while cable and wire prices are affected by the price of copper, they aren’t the same.
Hubert notes that if local producers acquire more pricing power, the margin between the two products may widen, adding that the current tariffs give American producers an advantage in price negotiations with their customers.
At the moment, it isn’t clear how extensively the tariffs shall be applied.
It remains to be seen whether Mexico and Canada will be exempt from these levies, given that these countries export a large chunk of copper products to the U.S. This includes wire rod, which is used in the manufacture of electrical cables.
Canada-based copper industry players like Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) will be closely monitoring the tariff situation as it could shape the market for this metal over the coming years.
NOTE TO INVESTORS: The latest news and updates relating to Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are available in the company’s newsroom at https://ibn.fm/ATBHF
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