Recently, copper prices experienced a historic plunge, primarily driven by U.S. tariff policies and shifting market sentiment. On Wednesday (July 30), the Trump administration announced new tariffs on certain copper products. Although the scope was narrower than expected—covering only semi-finished goods like copper plates and wires while excluding copper ore and scrap—the market reaction was severe. Investors had previously stockpiled copper to hedge against potential tariff risks, artificially inflating U.S. copper prices. Once the new tariffs took effect, the market rapidly adjusted, triggering a massive sell-off.
According to Dow Jones Market Data, the near-month copper futures price on the COMEX plummeted 22% intraday on Wednesday, dropping $1.24 per pound to $4.33—the largest single-day decline since 1968. Copper mining stocks also suffered heavy losses: Southern Copper Corporation (SCCO) fell nearly 7% this week, while Freeport-McMoRan (FCX) dropped 11%.
Neil Welsh, head of metals at Britannia Global Markets, believes this correction helps refocus the market on fundamentals rather than short-term speculation. However, even with this shift, the copper market still faces challenges. As a highly economically sensitive commodity, copper prices are closely tied to the growth prospects of the U.S. and China. Although the Federal Reserve held interest rates steady this week, weak employment data released on Friday heightened expectations of a September rate cut, further fueling economic uncertainty.
Notably, just one day before the Trump administration announced its tariff decision, Goldman Sachs was still advising clients to bet on rising copper prices. According to insiders, Goldman predicted in a Tuesday client call that Trump might impose a sweeping 50% tariff and recommended buying short-term call options. However, the actual policy fell far short of expectations, triggering the price collapse and catching the market off guard. This miscalculation underscores the extreme uncertainty in the copper market, with investors needing to brace for dual risks from policy shifts and weak fundamentals.
Overall, while copper prices have sharply corrected in the short term due to policy shocks, their medium- to long-term trajectory will hinge on the global economic recovery. As the market refocuses on fundamentals, further downside pressure may emerge, requiring investors to closely monitor economic data and policy developments.
