Morgan Stanley sees upside for copper prices amid potential US tariffs

Morgan Stanley anticipates further gains in copper prices amid expectations of potential US tariffs.

On Monday, copper for May delivery declined 0.8%, reaching $4.67 per pound ($10,274 per tonne) on the Comex market in New York. Despite this dip, prices remain 16% higher year-to-date in 2025.

In February, US President Donald Trump signed an executive order initiating a Section 232 review of copper imports. These investigations assess the impact of imports on national security.

Meanwhile, major commodity traders such as Glencore (LSE: GLEN) and Trafigura are rushing to ship copper to the US ahead of a potential tariff announcement, aiming to maximize profits, Bloomberg reported.

This month, US copper prices traded at a premium of up to $1,300 per tonne, according to Bloomberg.

“With tariffs not yet imposed, there is a strong incentive to send metal to the US, tightening markets in the rest of the world as well,” Morgan Stanley said in a note, Investing.com reported.

“Being long on a commodity in contango can be challenging, as the futures price ‘rolls down’ to the spot price. However, in backwardation, it can ‘roll up,’ and this shift can often drive investor inflows,” the bank added.

Supply constraints persist. Chile, the world’s largest copper producer, saw its output decline 24% month-over-month in January, marking a nine-month low.

“We remain constructive on copper, our preferred base metal. Fundamentals and price signals are positive, and inventories are tightening as metal is pulled into the US. While tariffs may bring demand concerns in the future, for now, physical markets continue to tighten,” Morgan Stanley said.

Copper production in the US has been steadily declining in recent years, with the country’s permitting system continuing to hinder new mining projects.

According to US Geological Survey data, US copper production fell 3% in 2024, following an 11% drop in 2023.