Copper Settles Near Record High: Rethinking its Role as an Economic Indicator
As of Tuesday, copper prices have settled above $5 a pound on the Comex for the first time since May 2021, trading near their record highs. Traditionally known as “Dr. Copper” due to its capacity to function as an economic barometer, the recent spike raises important questions about its reliability as an economic indicator, especially against the backdrop of ongoing trade tensions and tariff policies initiated by the Trump administration.
Understanding the Copper Surge
Copper’s recent price surge can be attributed primarily to supply concerns, specifically relating to potential tariffs on copper imports into the U.S. According to Natalie Scott-Gray, a senior metals demand analyst at StoneX, the U.S.’s heavy reliance on foreign copper—about 45% of its demand is met by imports—has heightened fears regarding supply chain disruptions. With Canada and Mexico exempt from certain tariffs under the USMCA, the dynamics of copper pricing may shift dramatically depending on government actions.
An executive order issued on February 25 by former President Trump has instructed the Secretary of Commerce to investigate the potential national security threat posed by copper imports, potentially leading to tariffs, export controls, or incentives to boost domestic production. While such moves may aim to fortify the U.S. copper market, analysts like Scott-Gray remain skeptical, suggesting that the strategies might not effectively stabilize pricing and could inadvertently exacerbate the ongoing uncertainty in the market.
The Current Landscape of Copper Pricing
Copper prices rose over 23% in 2025 leading up to this week, with most-active May futures settling at $5.02 a pound as of Tuesday. Contrary to typical economic signals derived from copper price movements, the current environment sees weakened correlations due to the trade battle. The premium for U.S. copper delivery reflected in CME pricing contrasts sharply with the London Metal Exchange’s (LME) three-month copper contract, which closed at $4.436 per pound. This gap indicates physical tightness in the LME marketplace, forcing traders to scramble for the commodity.
Long-Term Outlook Remains Viable
Despite the present disconnect, copper’s long-term potential as an economic health indicator continues to be supported by robust demand. Senior metals and mining analyst Charl Malan from VanEck noted that rising Chinese demand for copper has exceeded expectations, lifting the metal’s pricing outlook. Several forces are converging to buoy the market, including a substantial drop in treatment and refining charges (TC and RC), indicative of extreme supply shortages in mining.
Investor Sentiment and Speculations
Recent trends in speculative positions for copper on the Comex reveal a cautious approach among investors. Current speculative net positions show a near-neutral stance, a far cry from the 75,000-plus levels witnessed last May, when market conditions triggered a short squeeze. As noted by Scott-Gray, investors are wary of the implications of increased tariffs affecting global industrial health and trade, which could result in hesitance to commit heavily to copper investments.
Conclusion: Cautious Optimism in Unclear Waters
As copper prices continue to hover near record highs largely due to tariff concerns and supply chain uncertainties, it becomes imperative for investors to reconsider the traditional role of copper as an economic indicator. While the long-term fundamentals tied to global demand remain positive, the short-term volatility driven by geopolitical moves introduces layers of complexity that could inhibit sound investment strategies.
In a commodities market shaped increasingly by trade policies and international dynamics, staying informed about underlying fundamentals and adjusting positions accordingly is more crucial than ever. Investors would do well to navigate this tricky landscape with caution, being mindful of the shifts in regulatory policies and their potential impacts on pricing and availability in the copper market.
