The following blog is based on commentary dated September 2, 2025.
From defense systems to data systems, copper is everywhere. But U.S. tariffs have created a volatile pricing and supply chain environment for the metal.
In March of this year, following an executive order from President Trump, the United States launched a Section 232 investigation to examine national security and economic resilience risks given the large dependence on imports of critical minerals in the United States.
This investigation covers dozens of metals, including copper, aluminum, lithium, nickel, and platinum group metals (PGMs) such as platinum, palladium, and rhodium. While tariffs have been announced for some metals such as steel, aluminum, and copper, the investigation is still pending for PGMs and other metals.
U.S. Copper Dependence
Copper is particularly critical due to its wide-ranging applications in defense, renewable energy, data centers, grids, energy storage, water systems, and telecommunications, and the United States has grown reliant on imported copper; imports now constitute about half of U.S. copper demand.
Most of these imports (about 60%) are in the form of refined copper, a segment in which China maintains dominance, accounting for nearly half of the global refined copper supply. While Chile, the Democratic Republic of Congo, and Peru make up about 50% of world-mined copper, China is the biggest importer of copper concentrates, which are then smelted and refined domestically to increase purity.
This dynamic can be attributed to the rapid expansion of smelting and downstream capacities in China, a development that underscores the metal’s strategic importance to the country. China has developed into a major player in the copper market, making up almost 60% of refined copper demand worldwide.
The First Announcement
The anticipation of copper tariffs and the launch of a Section 232 investigation prompted notable shifts in copper markets, as traders, producers, and industry stakeholders adjusted to the evolving policy landscape.
Copper imports to the United States accelerated as market participants strived to ship the metal before the tariffs took effect. In addition, copper scrap exports were reduced drastically as U.S. scrap processing would largely reduce the import needs.
As a result, U.S. copper inventories spiked, offsetting inventory drawdowns in the London Metals Exchange (LME) and the Shanghai Futures Exchange (SHFE). This inventory glut could create headwinds for prices domestically and would need to be processed eventually, but global inventories are at normal levels (for the season), which suggests a balanced market.
However, the 50% tariff announcement in early July caught the market by surprise, pushing domestic copper prices to record levels. As a result, the Commodity Exchange (Comex)[1] premium over LME surged to nearly 30%, reflecting the higher costs faced by importers.
There was also an expectation of an even further acceleration of copper imports and near depletion of inventories outside the United States before the actual tariff implementation.
Copper Inventories Across the Three Major Exchanges
Sources: Bloomberg and William Blair as of September 2025. Inventories shown in metric tons.
The Second Announcement
The second announcement proved even more surprising: raw copper materials such as cathodes, anodes, concentrates, and ore were ultimately excluded from the 50% tariff measure. In other words, the bulk of U.S. imports in copper products would not be subjected to tariffs.
After the announcement, Comex copper prices collapsed more than 20%, narrowing the Comex-LME price differential to roughly 2%—a level last seen before the Trump administration took office. This price premium might even turn to a discount to better reflect the oversupplied U.S. market.
The Trump administration also strengthened scrap retention rules, mandating that about a quarter of high-quality scrap must be retained domestically beginning in 2027 to strengthen supply chains.
In addition, this announcement abruptly ended the arbitrage opportunity that had existed since the beginning of the year, while introducing a new risk: the potential reexport of U.S. stockpiles.
Copper inventories in the United States have climbed to their highest levels in two decades as importers front-loaded purchases, creating shortages elsewhere. However, this trend could quickly reverse if those stockpiles are reexported, creating potential fresh headwinds for the market. But for the time being, a lot of metal remains in exchange warehouses, reflecting prevailing price dynamics and interest rates.
This volatility in domestic copper prices could also be a source of disputes between buyers and sellers and could lead to losses being incurred from either side, adding complications when price uncertainty is already high.
Comex Copper Prices Surge as Tariffs Widen LME Premium
Sources: Bloomberg and William Blair, as of September 2025. The Comex-LME premiums/discount and Comex copper price shown in dollars per pound ($/lb).
Copper inventories in the United States have climbed to their highest levels in two decades as importers front-loaded purchases, creating shortages elsewhere.
The Issue With Domestic Copper Supply
Despite the United States’ strong copper reserves profile—47 million tons of reserves compared to about 1 million tons in annual production, according to the U.S. Geological Survey—we believe that increasing the domestic copper supply might prove challenging. Developing a new greenfield copper project (a new mining project built from scratch) can take 10 to 20 years, making regulatory stability and incentives beyond price essential. Yet the gap between copper’s long-term growth prospects and short-term price volatility poses some risks for end-users.
More importantly, investments in smelting and downstream capacities can be challenging, often requiring billions in invested capital while return on investment is usually low due to thin margins and profitability and the industry’s high cyclicality. The outlook for U.S. smelting also suffered a blow by the exclusion of copper raw materials from the tariff bill.
Despite the United States’ strong copper reserves profile, we believe that increasing the domestic copper supply might prove challenging.
Investment Implications
With most mined copper coming from emerging markets (EMs), investment opportunities in copper companies in the EM debt universe appear to be abundant.
In addition, many metal companies in the Corporate Emerging Market Bond Index (CEMBI)[2] are copper producers with diverse operations in terms of regions and products. Most of these producers ship copper concentrates mainly to China due to its large smelting and refining capacity, while direct exposure to the United States through exports has been limited across the copper producers in our universe, helping to shield the copper producers from price swings and volatility.
Alexandra Symeonidi, CFA, is a senior corporate credit and sustainability analyst on William Blair’s emerging markets debt team.
[1] The CEMBI is a benchmark index that tracks U.S. dollar–denominated bonds issued by corporations in EMs.
[2] The Commodity Exchange is part of the Chicago Mercantile Exchange. It is the primary U.S. exchange for trading metals futures and options.
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