- Copper prices are at record highs in New York following tariff fears and rising demand.
- A Bank of America analyst said the copper market is suffering a supply crisis.
- Rising defense spending and electric vehicle production are set to impact copper supply and demand.
Gold keeps reaching new highs above $3,000 this year — but it’s not the only commodity in hot demand.
Copper is used in everything from computers to electrical cables, and traders have been snapping it up amid the threat of trade tariffs being imposed.
Demand has been particularly strong in New York, with copper hitting a record on Wednesday of as much as $5.374 per pound — more than $11,840 per metric ton.
That exceeds the $5.20 per pound reached last May and is a near-30% surge since the start of the year.
However, copper on the London Metal Exchange dipped on Wednesday to as low as $9,893 per ton.
The same tariff fears have also pushed gold prices considerably higher in New York than London this year, with a rush to fly bullion across the Atlantic to take advantage of the difference.
Supply crisis
Similar stockpiling in the US has also been happening with copper, triggering a supply crisis, Michael Widmer, Bank of America's head of metals research, told Business Insider.
"Market participants are now trying to find copper units to send to the US in anticipation of tariffs," Widmer said.
"We don't have spare copper units available in the market. You need to see more investment in supply, and if that doesn't happen, then I think we will see an increasingly supply-constrained demand."
President Donald Trump's tariffs on copper imports may come far sooner than expected, Bloomberg reported on Wednesday.
Howard Lutnick, the Commerce Secretary, was given up to 270 days to submit a report on whether copper imports threatened US national security. A presidential action said that copper was critical to the country's economic strength and industrial resilience given its "vital role in defense applications, infrastructure, and emerging technologies."
Many now expect Trump to announce tariffs as soon as next week.
Analysts at Goldman Sachs said earlier this month they expected a tariff of at least 25% to be imposed on imports of copper and many other metals.
In a note last weekend, they remained "tactically cautious" about the metal, adding: "Any focus on China or a hawkish line on reciprocal tariffs will be negative for copper prices."
Rising defense budgets
European plans to increase defense spending following doubts about the US commitment to NATO are also likely to have an impact on copper supplies and prices.
In February, UK Prime Minister Keir Starmer said Britain would raise defense spending from 2.3% of GDP to 2.5% by 2027. Last week, Germany's parliament passed a bill to permit record spending on defense and infrastructure spending.
"I think between 2009 and 2030 we can effectively justify a doubling of copper demand from the defense industry," Widmer said.
Building electric vehicles and data centers were also copper-intensive activities. "So we basically just keep adding on the demand side," he said.
Goldman has forecast a global copper deficit of 180,000 tons this year due to factors including electrification, and slowing production from mines.
Global demand is expected to rise by 1.85% annually, from 28.3 million tons in 2020 to 40.9 million tons in 2040, per the International Copper Association.