Coface, US metal sector under pressure from copper tariffs

(Il Sole 24 Ore Radiocor) - The introduction of 50% tariffs on copper to start is fuelling "further concerns in the US manufacturing sector, considering that almost half of domestic copper demand is met through net imports". This is highlighted by Coface, a leading global player in trade credit risk management, recalling the "sharp" reaction of US markets to the 8 July 2025 announcement by US President, Donald Trump, recording "an intraday spike, with Comex copper futures up 13% to $11,290 per tonne". However, 'market dynamics remain fragmented: while prices on the London Metal Exchange (Lme), the global benchmark exchange, have remained relatively stable, domestic prices in the US have risen significantly'. In July, the premium over Lme prices fluctuated between USD 500 and USD 1,500 per tonne, compared to an average of around USD 150 in 2024.

The copper supply chain in the US is heavily dependent on foreign supplies, with net imports accounting for 45% of domestic consumption, worth more than USD 17 billion in 2024. Last year, Coface notes, the US produced only 3.5 per cent of the world's refined copper, while accounting for 6.3 per cent of global consumption, showing a significant gap in domestic production. Moreover, the US' foreign supply sources are mainly concentrated in three countries: Chile, Canada and Peru, which accounted for about 70% of copper imports in 2024 (Chart 2). These countries could be affected by falling demand due to higher prices in the US market. "For now, prices appear to be stabilising while markets await further details on tariffs. However, the most pessimistic forecasts indicate thatcopper prices in the US (Comex) could reach $15,000 per tonne. US companies will probably absorb the cost increase by squeezing margins, rather than passing the higher prices on to consumers. Therefore, in the short term, tariffs could weaken the financial health of US copper-related companies, such as manufacturers of building materials, power cables, wind turbines, and many others.

In the short term, aslight decline in US copper imports is expected, as domestic production capacity is insufficient to meet current demand, while global economic conditions are expected to contain the price surge. Slowing Chinese demand and global oversupply should partially offset the impact of US customs barriers. 'We expect,' says industry analyst Simon Lacoume, 'that anticipated purchases will ensure sufficient reserve levels until the end of the year in the US, reaching 240,000 tonnes in July, or almost 30 per cent of expected domestic consumption until year-end.

"The introduction of new tariffs on copper by the United States comes in a context already characterised by strong cost pressures and growing geopolitical tensions, adds Ernesto De Martinis, Coface Mediterranean & Africa Region CEO. "The consequences risk being amplified along the entire industrial chain, with direct repercussions on companies' profitability and on the balance of global trade flows. For exporting companies, particularly in producing countries like Chile, these measures can be a critical factor, affecting both demand and investment planning. The ability to anticipate risks and protect their trade exposure is now a key lever to ensure business continuity'.

Access to the US market is crucial for the Chilean copper sector. The US is the second largest export market for Chile, accounting for 28.5% of total copper shipments, just behind China. As the main export product, the flow of Chilean copper to the US represents 5% of the country's total exports. Given this deep interdependence, increased tariffs would result in a 'lose-lose' situation. Codelco, the state-owned company, is particularly vulnerable to the new trade barriers. In fact, unlike its competitors, which operate in multiple regions and sectors, it is exclusively focused on domestic copper production. In 2024, Codelco accounted for a quarter of domestic copper production and contributed USD 1.5 billion to the state budget. Any contraction of US demand in the medium term in response to tariffs would be particularly damaging to both the company and the Chilean state.