U.S. Copper Tariff Decision Looms, Leaving Copper Prices in a Two-Way Battle

Overview

This report focuses on how U.S. tariffs on refined copper distort global copper pricing. Bernstein notes that the current surge in copper prices stems not only from mine supply disruptions and financial speculation but, more critically, from traders’ preemptive stockpiling in anticipation of potential U.S. tariffs. The report constructs both a baseline scenario (no tariffs) and several bullish scenarios (tariffs imposed or delayed), quantifying arbitrage economics and inventory flow paths, while assessing the implications of various outcomes for copper prices and major mining equities. Despite short-term price volatility driven by policy uncertainty, the firm maintains its Market-Perform ratings for Anglo American, Antofagasta, and Freeport-McMoRan.

Core views

The primary driver behind rising copper prices has shifted from traditional supply-and-demand dynamics to policy-driven arbitrage. Over the past year, copper prices have climbed from $8,691 per tonne to a record high of $14,109 per tonne. Beyond supply disruptions at mines like Kamoa-Kakula and Grasberg, and rising net long positions in futures, the most critical factor is traders’ anticipation of possible U.S. tariffs—initially 15% starting in 2027, potentially escalating to 30% by 2028—which continues to fuel inflows into Comex warehouses. Since summer 2025, Comex copper inventories have accumulated at roughly 10,000 tonnes per week, adding up to 152,000 tonnes so far in 2026. Under the baseline scenario, should the White House explicitly rule out additional tariffs, the economic rationale for holding excess inventory would collapse. Copper stored in U.S. warehouses might either return to international markets when LME premiums become sufficiently attractive or be gradually absorbed by domestic demand. Either way, the release of this additional supply would exert downward pressure on prices, likely bringing them back toward $11,000 per tonne. At that point, U.S. import demand would weaken, easing global supply-demand imbalances. In contrast, bullish scenarios envisage three progressive pathways: first, a delay in decision-making, prolonging uncertainty; second, implementation of only a 15% tariff; third, a tiered tariff structure combining 15% and 30%. Under the 15% tariff assumption, the total cost of shipping copper from Western Europe to the U.S.—including freight, storage, and financing—amounts to approximately $754 per tonne over six months, whereas potential tariff-related gains exceed $2,000 per tonne, resulting in an extremely favorable risk-reward profile. This incentivizes traders to continue stockpiling at a rate of 10,000 tonnes per week, potentially locking away 250,000–300,000 tonnes by the second half of 2026 alone. If market expectations shift toward a 30% tariff by 2028, the stockpiling cycle could extend through late 2027, accumulating as much as 700,000–800,000 tonnes—equivalent to removing the annual output of a large Grasberg‑class mine—thereby tightening non-U.S. supplies and pushing copper prices back above $14,000 per tonne, where they could remain sustained.

Analysis framework

The report employs a dual-dimensional analytical framework of 'policy scenarios × arbitrage economics.' First, it identifies U.S. tariff policy as the marginal determinant shaping current copper pricing, rather than traditional supply-and-demand gaps. Next, by dissecting the full cost chain of cross-market arbitrage—including European premiums, shipping costs, CME warehousing fees, and SOFR‑linked financing—it calculates break-even points across different storage durations and compares these against potential tariff‑related gains, thereby validating the rationality of stockpiling behavior. Building on this foundation, the analysis incorporates structural U.S. shortages (import dependency around 50%), exchange‑and‑non‑exchange inventory data, and trends in CME warehouse capacity expansion to assess the sustainability and physical constraints of inventory flows. Finally, the findings are mapped from commodity-level scenarios onto equity targets, using beta coefficients to quantify each company’s price elasticity relative to copper prices, thus bridging macroeconomic policy shifts with micro‑level valuation adjustments.

Methodology notes

• Industry/sector analysis frameworkPrice‑quantity decomposition

  Breaking down copper price movements into multiple drivers such as supply disruptions, financial speculation, and policy‑driven stockpiling.

  Rather than attributing price changes solely to 'supply tightness,' the report disaggregates last year’s price increases into quantifiable factors—mine accidents, CFTC position shifts, and Comex inventory buildups—to help readers distinguish between fundamental support and temporary policy‑induced markups.

• Event‑driven博弈 and behavioral financeEvent-driven analysis

  Constructing multiple scenario pathways around the June 30 deadline for tariff decisions and evaluating inventory flows and price reactions under each outcome.

  Unlike static forecasts, this approach treats policy uncertainty itself as a pricing variable, analyzing optimal trader strategies under scenarios such as 'delay,' '15%,' or '30%' to reveal the extent and duration of potential deviations from fundamentals.

• Quantitative/factor/portfolio theoryBeta/alpha analysis

  Using beta coefficients to quantify mining stocks’ sensitivity to copper price changes, distinguishing high‑elasticity versus low‑elasticity holdings.

  A beta greater than 1 indicates that stock price fluctuations amplify copper price movements. For example, FCX’s beta of 1.5 means that for every 10% increase in copper prices, its stock price theoretically rises by about 15%. This helps investors select offensive or defensive allocations based on their outlook for copper prices.

• Valuation methodsEV/EBITDA valuation

  Applying a hybrid valuation method—75% EV/EBITDA (7.0x 2027E EBITDA) plus 25% DCF—for Anglo American to set target prices.

  Mining companies feature substantial capital expenditures and high depreciation rates, making EV/EBITDA ratios better suited than PE multiples to reflect operating cash flow. The blended DCF component anchors long‑term asset values, preventing distortion caused by single‑multiple approaches during cyclical volatility. Such combined valuations are standard practice for resource stocks.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Freeport-McMoRan (FCX)

  High‑elasticity beneficiary of rising copper prices, with a beta of 1.5x.

  Strengths

  Most sensitive to copper price hikes, backed by core assets like Grasberg that provide production capacity.

  Weaknesses

  Repair costs following the Grasberg mudslide may exceed expectations, and risks associated with delays in Indonesian IUPK permits.

  Comparison

  Compared to BHP (beta 0.7x), FCX exhibits stronger upside during copper price rallies but also deeper downside during downturns.

  Risks

  Delays in renewing mining licenses in Indonesia and rising operational costs.

• Antofagasta (ANTO.LN)

  Pure copper stock, with a beta of 1.4x, directly benefiting from copper price movements.

  Strengths

  Business focused exclusively on copper, with price elasticity second only to FCX.

  Weaknesses

  Uncertainty surrounding the progress and capital expenditure of the Centinela secondary concentrator project.

  Comparison

  Similar to FCX as a high‑beta stock, though smaller in market cap and slightly less liquid.

  Risks

  Lower-than-expected copper prices and potential delays or cost overruns in the Centinela project.

• Anglo American (AAL.LN)

  Diversified miner, with a copper price beta of 1.1x, exhibiting moderate sensitivity.

  Strengths

  Growing share of copper business, supplemented by diamonds and iron ore for diversification.

  Weaknesses

  De Beers facing competition from synthetic diamonds and regulatory risks in South Africa.

  Comparison

  Beta lower than FCX and ANTO, yet higher than BHP; valuation recovery depends on progress in spin-offs and restructuring.

  Risks

  Valuation of the diamond division below expectations and unstable political environment in South Africa.

Key data

• Historical peak copper price$14,109/tReached in mid-May 2026, driven by improved risk appetite and widening LME‑CME price spreads.
• Average weekly Comex copper inventory increase~10kt/weekContinuous inflow since summer 2025, reflecting active tariff arbitrage.
• Total cost of 6-month arbitrage$754/tIncludes €168 European premium, $100 freight, $165 warehousing, and $321 financing (SOFR + 100bps).
• Potential gains from a 15% tariff> $2,000/tBased on a $14,000/t copper price assumption, far exceeding arbitrage costs, driving continued stockpiling.
• U.S. dependence on refined copper imports~50%Share of apparent consumption accounted for by imports in 2024, with structural shortages supporting Comex premiums.
• FCX’s copper price beta1.5xHighest among covered stocks, making its share price most sensitive to copper price changes.

Impact & implications

For the U.S., if tariffs are implemented, Comex prices will structurally remain higher than LME prices, making convergence difficult because imported copper must carry tariff premiums to attract marginal supply. This means U.S. downstream manufacturers will face persistently higher raw material costs compared to international markets. Globally, under bullish scenarios, large quantities of copper locked in U.S. warehouses could create artificial shortages outside the U.S., even if mine supply remains unaffected, potentially pushing international copper prices higher. For mining companies, while rising copper prices boost revenues, current valuations already partially reflect optimistic expectations, and policy uncertainty remains extremely high. Consequently, the firm opts to maintain a neutral stance rather than chasing further gains. The upward revision of Anglo American’s target price primarily reflects updated exchange rates and copper price assumptions, rather than any fundamental change in underlying conditions.

Risks

• High uncertainty regarding the trajectory of U.S. tariff policy, potentially triggering sharp copper price swings.
• If tariffs are imposed, rising input costs for U.S. downstream manufacturers could lead to negative demand feedback.
• Although Comex warehouses currently show no bottlenecks, extreme stockpiling could strain logistics and financing conditions.
• Faster-than-expected recovery of mine supply could offset the scarcity effects of tariffs.
• Broader macroeconomic downturns may suppress actual copper demand.

What to watch

• The White House’s final decision or announcement of a delay regarding refined copper tariffs by June 30.
• Whether Comex copper inventories continue to grow at a pace of 10,000 tonnes per week.
• Trends in the LME‑Comex price spread, indicating the opening or closing of arbitrage windows.
• Progress in trade negotiations between the U.S. and resource‑rich countries like Chile and Indonesia.
• The approval timeline for new CME warehouse registrations, assessing physical capacity limits.