Copper prices are holding steady at $5.50 per pound, having risen 10% since Monday but falling from a high of $5.70 earlier. Concerns about supply disruptions due to impending US trade tariffs are contributing to this stability.

A 50% tariff on copper imports is set to take effect on August 1 to support the US industry and reduce reliance on imports. This announcement led to a record 25% premium of US copper futures over LME prices, as US traders stocked up to avoid the tariff. However, this may lead to domestic shortages later this quarter as stockpiles diminish.

The US imports nearly 50% of its copper, mainly from Chile; however, domestic refining capacity is limited. Building new capacity could take years, potentially causing higher costs and delays in the construction and electronics sectors.

Copper is trading within a long-term ascending channel with strong volume support. The RSI remains elevated, suggesting a bullish outlook. Immediate support levels are at $5.03, $4.62, and $4.29.

As the tariff deadline approaches, market volatility is expected to increase. Buyers should be cautious, as copper trading carries substantial risks.

Looking at the current price action, copper is maintaining a foothold around the $5.50 mark. After climbing sharply earlier in the week, prices have retreated slightly from the intraday peak of $5.70, suggesting the initial wave of buying has steadied, although the broader uptrend remains intact. The past few sessions have seen heightened activity, largely triggered by the anticipated 50% tariff set to hit imports come 1 August. This policy move is aimed at encouraging domestic production, but its timing and scale could create short-term mismatches in availability.

In anticipation, we’ve already seen US traders front-load their purchases, driving a sharp divergence between domestic futures and global benchmarks. The gap currently stands at an unprecedented 25%, reflecting ongoing efforts to secure inventory before the new cost structure comes into play. While this defensive trading makes sense in the short term, the follow-on impact may be harder to manage. Should these stockpiles run down faster than expected, the market could face inventory tightness, pushing prices higher through the third quarter—especially if replacement supplies are slow to arrive amid refining bottlenecks.

Nearly half of US consumption is sourced internationally, particularly from Latin America. The lack of refining infrastructure has always been a weak point in the American supply chain, and with new facilities requiring years, not months, to come online, near-term substitution isn’t realistic. That puts sustained pressure on domestic supply, particularly in sectors with high conductivity requirements like semiconductors and renewables.

Technical signals still favour strength in the current trend. The Relative Strength Index, while elevated, shows no signs of divergence just yet, and the long-term ascending channel offers a clear path upward so long as support levels remain intact. For reference, price floors around $5.03, then $4.62 and $4.29 below that, could come into play if current momentum fades. Volume support is also a positive read, confirming that the recent moves weren’t built on froth alone.

That said, we’re preparing for more price movement as the policy deadline nears. Traders may be tempted to exploit brief price dislocations, but overexposure to single-direction bets could backfire if volatility accelerates. As premiums stretch and inventory conditions shift, we recommend keeping positioning flexible and liquidity tight. Watching key expiry dates, keeping options coverage in place, and rolling exposure instead of doubling down will be prudent.

The tariff is effectively frontloading demand while squeezing future supply. This is likely to lead to more aggressive moves in futures curves and warrants closer monitoring of spreads, particularly calendar spreads that could widen as we close in on August. Eyes should remain on warehouse drawdowns and export data from Chile, as any disruptions there could fuel another leg higher.

The unknown lies in how quickly downstream users adjust. If consumption doesn’t ease—or worse, accelerates—we might be looking at ongoing scarcity priced not just in dollars, but in volatility spikes as well. We remain attentive to these signals. Keeping our hedges nimble and order books staggered may be the best course in this tightening market.