While many investors may be mesmerized by the surging price of gold, another metal, copper, is having its own bull run. Copper prices in New York reached a record-setting $5.24 for a pound of the metal after news reports suggested that President Trump was poised to slap import tariffs on copper within a few weeks. Markets had expected this action to occur much later in the year.
The price of copper has seen a 30% increase so far this year. This spike was largely a result of traders taking preemptive action by growing their stockpiles of the metal before tariffs kick in. Compared to other minerals like gold, which has seen a rise of 16%, the jump seen in copper’s price is remarkable. Other indexes in America have also performed less impressively when compared to copper’s rise.
The market rally is happening in spite of the fact that Trump is yet to announce tariffs on copper though he signed an executive order in February initiating investigations on risks to national security arising from having to import this metal. Traders believe it is only a matter of time before tariffs are imposed.
Ole Hansen, Saxo Bank’s commodity strategy head, says the rising price of copper isn’t due to any fundamental demand shift among consumers. He adds that stockpile shifts due to speculation are behind the upward shift in price as traders move copper to the U.S. in anticipation of upcoming price changes when tariffs are announced.
Hansen says copper futures in New York have now outpaced those in London by 17%. If conditions continue as they are, this discrepancy is bound to widen, further moving the copper market away from the traditional market forces that controlled its prices.
Mercuria, a major commodities trading firm, indicates that copper shipments destined for America could hit 500,000 tons in March and yet the usual average volume has been in the region of 70,000 tons. As copper shipments are fast-tracked to the U.S., this near-term demand could see copper markets further destabilized.
It should be noted that the tech industry and electric vehicle manufacturing have also caused global demand for copper to increase. Coupled with China’s demand for this metal, the world could see a shortfall in the needed supplies of copper. This is especially likely given that Glencore, a major copper producer, halted production at one of its smelting facilities located in Chile.
Once markets stabilize after the tariff situation in America is clarified, prices may correct, but growing demand suggests bull conditions for this commodity. Copper value-chain actors like Torr Metals Inc. (TSX.V: TMET) could benefit from these tailwinds.
NOTE TO INVESTORS: The latest news and updates relating to Torr Metals Inc. (TSX.V: TMET) are available in the company’s newsroom at https://ibn.fm/TMET
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