Video
Copper Clash: Tariffs, Trade Shifts and Opportunity
U.S. copper tariffs are reshaping global markets.1 In this episode of Metals in Motion, Steven Schoffstall, Director, ETF Product Management at Sprott Asset Management, discusses how copper prices are realigning as fundamentals point to long-term shortages and surging demand from the energy transition.
For the latest standardized performance and holdings of Sprott Precious Metals ETFs, please visit the individual website pages: COPP and COPJ. Past performance is no guarantee of future results.
Video Transcript
Thalia Hayden: I'm Thalia Hayden with ETF Guide, and I’m so glad you're here. Copper has been in the news lately as President Trump ordered tariffs of up to 50% on some imports of the metal. But what does this mean for copper prices, supply and demand and copper miners?
To help us understand this new environment, we have Steve Schoffstall, Director of ETF Product Management at Sprott Asset Management. Steve, welcome to the program. Great to see you.
Steve Schoffstall: It's great to be back. Thanks for having me.
Thalia Hayden: Let's begin with copper. It has been in the news quite a bit this year. What should investors know about the recently announced copper tariffs?
Steve Schoffstall: The announcement first provided much-needed clarity to the copper markets. But as we've learned throughout this year, things can quickly change. The main takeaway is that the input materials, such as ore and cathodes, are not subject to the tariffs.
That's very significant because most of the international trade in copper will be exempt. However, there is a 50% tariff on semi-finished copper products, such as copper pipes and wiring. With the announcement behind us, we're hoping the markets can move to more fundamentals and escape some of the recent noise. But with that being said, news flow is changing quickly, which we continue to monitor.
Thalia Hayden: How have copper markets reacted since the tariff announcement?
Steve Schoffstall: Great question. For most of this year, copper prices have pretty much been dislocated. If you look at the U.S., it was commanding a significant premium to prices over LME-traded copper. LME-traded copper tends to be the international benchmark price. We saw an arbitrage trade where people could buy copper overseas and were looking to ship it into the U.S. ahead of any expected tariffs.
After the tariff proclamation went public about a week and a half ago, we saw that U.S. prices collapsed much closer to being in line with LME Copper. They went from an over 30% premium down to 1% within a few hours. In recent months, we have seen a lot of copper being directed to the U.S. ahead of these tariffs, and that has caused U.S. inventories to reach their highest point in 21 years.
At the same time, we saw people drawing down LME copper inventories. They were off by about 50%. But since these tariffs have been announced, we've started to see the LME stockpile increasing again. We're starting to see more of that balance return to the market.
Thalia Hayden: You mentioned long-term fundamentals. What's the supply and demand outlook for copper?
Steve Schoffstall: Most estimates will put the market into a supply deficit. We're getting some time in late 2025, out through 2027. That tends to be the window that most are pointing to. A lot can change. The copper market tends to have many supply disruptions.
On average, we see from supply disruptions about 5% a year. Codelco, the Chilean state producer of copper, has its largest mine, which suffered a partial collapse about a week and a half ago. So, they're still working to bring that online. That's just one example that we see as disruptions happen.
But typically, when you look at the broader copper market, about every 25 years or so, as economies advance, we see about a doubling of copper demand. We're starting to see that as developing countries increase their standard of living, developed countries make technological advancements, including AI and electrification.
That's providing this backdrop of increased demand. But we are seeing some headwinds regarding supplying more copper. First, one of those would be declining ore grades, as much of the easy-to-access copper has already been mined.
That means miners have to extend the life of existing mines and move more of our dirt to bring more out of the ground. We also see long lead times for bringing a new mine into operation once the copper is discovered. On average, in the U.S., it could take about 29 years from discovery to production.
We see large producing countries like Canada, which can take about 27 years. Chile, the largest producer in the world, takes about 22 years. Significantly, at times, we think that relaxing the permitting process could go a long way to help bring new supply on time. But we expect to see a structural supply deficit out into the foreseeable future once we get past these next couple of years, as we move through the coming years.
Thalia Hayden: It makes sense, and there are growing concerns about an economic slowdown in the U.S. What could be the implications of copper from a slowing economy?
Steve Schoffstall: Copper has traditionally been viewed as a barometer of global economic health, earning it the nickname Dr. Copper throughout the last several decades. When you look at where we've come over the previous couple of years, significant concerns about China's slowing real estate market have weighed on copper over the last several years.
Any potential slowdown in the U.S. would also weigh on copper markets. There's a notable difference now compared to previous economic cycles: There's a lot more support for structural demand for copper as it relates to AI, electrification, and the energy transition. The support wasn't there five or 10 years ago or in the last economic cycles, when copper was really impacted. We do think that will provide a floor for copper prices and should support higher copper prices going forward. The hope is that it will also help weather any potential slowdown in the U.S. or other global economies.
Thalia Hayden: Great timely input. How can investors access the copper opportunity?
Steve Schoffstall: We think the easiest way for most investors would be to access copper miners through an ETF. Copper miners are already operating at healthy margins, as we've seen considerable price improvement in copper over the last several years. The ETF gives you some advantages over single-stock selection because you get diversification.
You're not just tied to one miner. Also, it could be difficult for some investors to access foreign markets by investing in an ETF. The ETF can hold domestic and foreign equities. It is an easy, well-diversified way for investors to access the copper market.
The Sprott Copper Miners ETF, ticker COPP, provides pure play exposure to copper miners, and also has about a 5% allocation of physical silver via a closed-end fund that the ETF holds. Then we also have the Sprott Junior Copper Miners ETF and ticker COPJ.
Again, this is a pure-play strategy focusing on junior copper miners, which tend to be exploration and development companies. In our view, a pure-play company is one that has at least 50% of its revenue or assets tied to mining, developing, or exploring for copper.
When we look at these two ETFs, COPP is the only pure-play all-cap copper ETF in the U.S. market. It is also the only ETF that provides physical copper exposure. Then, COPJ is the only junior copper ETF offered to US investors.
Thalia Hayden: Steve, let's say someone is new to copper investing. What should they know as they do their research?
Steve Schoffstall: Two things come to mind. First is investing. When you invest in an ETF, if that is the route you choose, it's important to look past the fund's name. I mentioned that our strategies are pure play. We think that's important, particularly in the copper markets, because if you look at the 10 largest copper producers, only three of them are publicly traded and majority copper miners.
A lot of those producers might have less than 10% of their revenue coming from mining copper. If you're going to invest in a company with a strategy that has copper in the name, it has a broader mandate; you could have a lot of unintended exposure that you're getting access to. It waters down that copper exposure.
Finally, when you start looking at copper markets and many commodity markets, they can experience periods of volatility. I think it's very important to look at the fundamentals and take a longer-term view before entering those positions, and just understand and be comfortable with the volatility you might have in the short term while understanding the long-term view of the market.
Thalia Hayden: Great stuff, Steve. Unfortunately, we are out of time, but thank you so much for your timely insights and keep up the great work.
Steve Schoffstall: Thanks for having me. See you next time.
Thalia Hayden: That does it for today's episode of Metals in Motion. Thank you so much for joining us. If you enjoyed the show, please let us know in the comment section below by hitting that like button. To learn more about the critical materials and ETF we discussed on today's program, visit sprottets.com.
If you missed previous episodes of Metals in Motion, just hit that Metals in Motion playlist to catch up. I'm Thalia Hayden with ETF Guide. Thanks for watching, and we'll see you next time.
Footnotes
1 | Effective August 1, 2025, the U.S. imposed 50% tariff on imports of semi-finished copper products and copper-intensive derivative products. |
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