Looking to the Futures

Copper futures (/HG, currently set for May delivery) have retreated from a record high over $6.50 reached at the end of January, coming alongside all-time highs in precious metals. Following the retreat of about from that peak (currently about 12% off the all-time high), it has been largely rangebound between $5.60 and $6.00. Prior to the rally to the record high, it only traded over $5.50 for a few weeks last July following announcements on tariffs.

The recent rally was boosted by supply disruptions leading to some tightness in physical markets. In September, a mudslide in Indonesia led to a shutdown of the Grasberg Block Cave Mine, the second-largest copper mine in the world with annual production of over 500,000 tons. Operations are expected to resume in the second quarter of 2026. The world’s third-largest mine, the Kamoka-Kakula Complex in the Democratic Republic of the Congo experienced high water levels in the underground mine last year, reducing guidance for this year and next. In Chile, the world’s largest copper producer, a tunnel collapse closed the El Teniente Mine, eighth biggest in the world, with operations restarting gradually since then. Chile’s state-owned copper producer Codelco also reported a sharp drop in production to start the year, with January production declining 47% from December.

On the other hand, domestic supply looks likely to get a boost in coming years as a legal battle over a big project in Arizona was resolved in favor of the mining interests. The Resolution Copper Project is set to move forward after an appeals court denied an injunction on a land swap with the U.S. Forest Service. The 2,400 acre site is believed to contain 20 million tons of copper, with production expected to come online in the next ten years. To the north, a project of similar scale is currently halted on environmental grounds. The Pebble Project in southwest Alaska could contain up to 53 billion pounds of copper. The EPA vetoed the project on concerns of impacts to the environment, including endangering Bristol Bay and the world’s largest sockeye salmon fishery.

Trade policy has also contributed to tight supply. Last February, President Trump signed an executive order directing the Department of Commerce to investigate potential national security risks of copper imports. That order led to a flood of copper imports ahead of the possible tariffs. Imports averaged over 200,000 tons in the following months, versus normal imports of 70,000 tons per month. On July 8, a 50% tariff was announced on copper imports leading to a 90-cent jump. The policy was then clarified on July 30 to only apply to semi-finished products like pipe and wire, which led to a selloff of $1.16.

Due to the front-loading of imports ahead of expected tariffs, domestic inventories reported by COMEX stand at around 590,000 tons, five times the previous year. Inventories at the Shanghai Futures Exchange and the London Metals Exchange are also both well above their long-term averages, holding over 330,000 tons each. This ample supply could reduce upward on prices in the short term. Another factor to consider is the strength of the dollar. The all-time high for copper in January coincided with a four-year low for the dollar index ($DXY). It also came at the same time as a two-year low versus the currency of Chile, the source of over half of U.S. copper imports.

Speaking of the dollar, today’s Fed announcement could move markets, though the CME FedWatch Tool shows traders are all but certain that rates will remain at 3.50-3.75. Factory orders and PPI numbers are also out today. While not directly related to copper, today’s crude oil inventories report could also tweak the numbers based on inflation effects.

The retreat from the recent peak could be a consolidation or turn out to be the right side of a head-and-shoulders pattern. The Contract is below the 20- and 50-day SMAs and in touch with the 9-day. The RSI consolidated along with the price, keeping between 40 and 60 and not telling much of a story. The MACD has been mostly negative for the past two months.

Core PPI 8:30 AM ET  

EIA Crude Oil Inventories 10:30 AM ET

Factory Orders 10:00 AM ET 

FOMC Decision 2:00 PM ET

MBA Mortgage Applications Index 7:00 AM ET

Net Long-Term TIC Flows 4:00 PM ET

PPI 8:30 AM ET

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